Owner of Dish Network to buy DirectTv

Ed Garsten

Monday, Oct. 29, 2001 | 10:54 a.m.

DETROIT -- 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 an unusual 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 United States.

EchoStar's Dish Network is a distant No. 2 to DirecTV, with 6.7 million subscribers. The combined company would serve about 17 percent of the pay television market, GM said.

The new company would retain the EchoStar name and use the DirecTV brand for its services and related products, according to GM. The deal must be approved by federal regulators and GM shareholder.

Under terms of the deal, GM would technically spin off Hughes and merge it with EchoStar. A majority of EchoStar's shareholders already have given their approval to the deal through written consent, according to a statement.

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.

"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 also 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, EchoStar chairman and chief executive.

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.