DirecTV in the News

EchoStar Buying DirecTV

DETROIT (AP) - October 29, 2001 - The company that runs the Dish Network is poised to become the nation's leading provider of home satellite TV service after reaching a deal to acquire rival DirecTV from General Motors Corp.

EchoStar Communications Corp. is buying Hughes Electronics and its DirecTV subsidiary from GM for approximately $25.8 billion. The deal, which was struck Sunday during a weekend session of GM's board, came after News Corp. chairman Rupert Murdoch abruptly pulled a long-standing offer for Hughes off the table.

With 10 million subscribers, DirecTV is the largest provider of home satellite television service in the U.S. EchoStar's Dish Network is a distant No. 2 to with 6.7 million. The combined 16.7 million subscribers would be slightly fewer than those of AT&T Corp., the leading cable TV provider.

The new EchoStar would control nearly all of the satellite TV market in the U.S., but GM said in a statement that the new entity would have 17 percent of the total pay TV market while cable companies control 80 percent.

Charles Ergen, chairman and chief executive officer of EchoStar, told reporters and analysts at a news conference held in New York Monday that the deal would create "a true competitor to cable."

The new company would retain the EchoStar name, and DirecTV would become a brand for its services and related products. The deal must be approved by federal regulators and GM shareholders.

Ergen estimated it would take up to six months to achieve GM shareholder approval, and up to a year to win regulatory approval. EchoStar shareholders have already approved the merger. The deal is expected to close in the second half of 2002, the companies said.

"This transaction provides significant benefits to Hughes, EchoStar, millions of present and future DirecTV customers, and shareholders of both GM and EchoStar," said GM president and chief executive officer Rick Wagoner in a statement Sunday.

"U.S. consumers would benefit from the combined company's ability to increase significantly the number of markets served with local channels via satellite, provide additional channel offerings, increase high-definition TV offerings and accelerate the introduction of next-generation high speed Internet services," added Charles Ergen.

Ergen also said the new company would be able to drive down costs by sharing satellite spectrum, bargaining for lower programming costs, and having one standard for set-top boxes.

Ergen will remain chairman and CEO of the new company. The board of directors will consist of nine members, five of whom would be independent directors.

Under terms of the deal, GM would technically spin off Hughes and merge it with EchoStar. EchoStar is offering 0.73 EchoStar shares for each share of Hughes. Based on EchoStar's closing stock price Friday of $25.26, the deal values each share of Hughes at $18.44 - a 20 percent premium to Hughes's closing share price of $15.35. 

EchoStar is also offering a $600 million breakup fee to Hughes in the event that the deal is turned down by regulators.