GM agrees $25.8 bn sale of Hughes to Echostar

By : |October 28, 2001 0



Arindam Nag and Derek Caney

NEW YORK: General Motors Corp. on Sunday agreed to sell its satellite
television unit Hughes Electronics Corp. for $25.8 billion in cash and shares to
EchoStar Communications Corp., sources familiar with the negotiations told
Reuters.

                                 

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One person told Reuters that the decision to sell Hughes, the owner of
satellite television service provider DirectTV to Echostar was taken at a board
meeting. "Most of the details have been finalized, a few things are still
left but its done, its been decided," he said.

Echostar declined to comment and neither General Motors nor Hughes were
immediately available for comment. The deal gives EchoStar DirecTV over 10
million subscribers and an opportunity to derive cost savings and additional
revenue of $56 billion. EchoStar’s Dish Networks already has over six million
subscribers.

GM’s agreement to sell Hughes to EchoStar comes a day after News Corp., owned
by media mogul Rupert Murdoch, backed out from what has been a two-horse race
after GM failed to come to a decision on it at an earlier board meeting on
Saturday.

News that News Corp. has now lost all chances of returning to the negotiating
table is a blow for Murdoch and accordingly News Corp.’s shares, which started
trading in Sydney, Australia, and fell 81 cents or 5.5. per cent to A$13.77,
before regaining some ground at $14.00 at 7:40 p.m.

Echostar is offering 0.73 of its shares for each Hughes share, which closed
on Friday at $15.35, a source familiar with the negotiations said. The combined
group, which will have nine board members, three for them from Echostar, will be
headed by Echostar boss Charlie Ergen as chief executive.

Heading into the weekend, News Corp. was believed to be the front-runner to
take over Hughes, which owns the DirecTV service. News Corp. sought to merge
Hughes with its Sky Global network of satellite services, which currently
stretch from Europe to Asia to Latin America.

GM was believed to be getting $4 billion in cash with Microsoft Corp.
expected to kick in $3 billion in cash and cable magnate John Malone to
contribute $1 billion, sources said.

On Saturday, News Corp. was prepared to host an event to announce the deal
Monday, a source said, but GM’s board asked for 48 hours more after EchoStar
made some last minute adjustments to its proposal.

"That was absolutely unacceptable to News Corp.," the source said.
"News Corp. put a fully financed deal on the table, while GM wanted to
negotiate with someone who didn’t have the cash. Murdoch wasn’t going to stand
for that."

News Corp. declined to comment.

Analysts were surprised by Murdoch’s move. "I’m shocked that Rupert was
so close to a deal that he’d been negotiating for a year and a half and he
didn’t want to wait two more days," said Thomas Weisel Partners analyst Ray
Schleinkofer.

"But on the other hand, it’s probably not a bad negotiating strategy
because he wouldn’t want to be lured into a bidding war," he added.

(Additional reporting by Tom Johnson)

(C) Reuters Limited.

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