Charlie Ergen is making big moves to try to erase the advantage that terrestrial cable MSOs have over satellite TV: broadband delivery. Just a few days after Dish Network cut a $1 billion deal to acquire DBSD North America, Dish’s sister company EchoStar Corporation has announced a $2 billion takeover of Hughes Communications.
Under the deal announced Monday (2/14), EchoStar will pay $60.70 per share for Hughes. The stock had closed Friday at $61.78, but the joint announcement by the companies noted that the buyout bid is 31% above “Hughes’ unaffected closing share price of $46.43 on January 19,” before rumors began flying of a deal in the works. And yes, a bunch of class action lawsuit firms immediately began trolling for clients to sue over the deal.
The offer works out to about $1.3 billion to buy out Hughes shareholders, with EchoStar to assume and refinance about $700 million in Hughes’ debt.
Hughes is a major player in broadband satellite technologies and services, as well as a provider of managed network services. “The transaction will greatly enhance EchoStar’s capabilities for broadband transport of video and data,” the announcement noted.
The companies say the deal should close later this year, following regulatory approvals. Investment funds affiliated with Apollo Management IV, L.P., who own a majority of Hughes’ outstanding stock, have approved the transaction by entering into a written shareholder consent.
“We are very pleased to announce this transaction as it brings together the two premier providers of satellite communications services and delivers substantial value to our shareholders. By combining Hughes’ operational strength and proven record of customer satisfaction with EchoStar’s expertise in cutting edge satellite video technology, customers will benefit significantly from our shared institutional excellence,” declared Pradman Kaul, President and CEO of Hughes.
“There is a unique and compelling fit between Hughes and EchoStar. With a rich engineering culture, an extensive fleet of owned and leased satellites, and experienced personnel in communications centers around the world, the combination of EchoStar and Hughes will create a powerful leader in video and data transport,” said EchoStar President and CEO Michael Dugan.
RBR-TVBR observation: Three billion bucks may seem like a lot of money to most of us, but for Charlie Ergen it is well worth the money to make his satellite-based companies competitive in the fastest-growing part of the business of his ground-based competitors. And since EchoStar is in the satellite services business, it will make money from the Hughes acquisition by selling its services to lots of companies besides Dish, perhaps including some of those MSOs.