NEW YORK, Oct. 29 (UPI) -- EchoStar Communications Corp. on Sunday won the battle for dominance in the U.S. satellite television industry after the board of directors of General Motors Corp. approved its $25.8 billion bid for Hughes Electronics.
EchoStar clinched the deal after News Corp. withdrew its offer Saturday. If approved by regulators, EchoStar's purchase would create a home satellite company with 16.7 million subscribers.
"We've said all along that we wanted to structure an agreement that would provide continued strong growth at Hughes and maximum value for both GM and GM Class H shareholders," said Rick Wagoner, GM's president and chief executive officer, in a statement. "This transaction achieves these objectives."
Under the agreement, GM would spin off Hughes, which would then merge with EchoStar. The combined company would be called EchoStar and would use the DirecTV brand for services and related products.
Wagoner said GM accepted EchoStar's offer for its 30 percent stake after the satellite TV company said it had lined up nearly $6 billion in financing to counter News Corp.'s offer.
On Sunday, the Detroit-based automaker and EchoStar confirmed that the deal, even though it will require $5.5 billion in additional financing, which has yet to be raised.
Meantime, Deutsche Bank and GM are supporting the plan with an evenly divided $5.5 billion in bridge financing, the companies said.
The deal was expected to close in the second half of next year.
EchoStar, of Littleton, Colo., 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 closing share price of $15.35.
News Corp. Chairman Rupert Murdoch withdrew his company's proposal Saturday after GM's board failed to choose a buyer. The two companies had been in negotiations for more than 18 months, before EchoStar entered the fray in August.
"Hughes would have been an excellent strategic fit for our global platforms, and we are disappointed with the Board's inaction in the face of an as-yet unfinanced counter proposal," Murdoch said in a statement.
News Corp. had coveted Hughes' DirecTV satellite service as the U.S. division of its Sky Global network of satellite TV service. Currently Sky Global stretches from Europe to Asia to Latin America.
News Corp. had planned to merge Hughes with Sky Global and take the company public.
"The combination of EchoStar and Hughes is expected to generate very substantial synergies utilizing the advantage of direct broadcast satellite television, cost savings from the elimination of costly duplicate satellite bandwidth and infrastructure, and strong management offering more fundamental business practices," said Charles Ergen, EchoStar's chairman and chief executive officer.
Ergen said, "The company would also have enhanced scale to compete effectively against the dominant U.S. cable and broadband providers -- a critical factor given increasing consolidation in the cable industry."
DirecTV has 10 million subscribers, while EchoStar, which operates Dish Network is a distant two among satellite providers with 6.7 million subscribers.
Shares of EchoStar were set to open Monday at $25.26, after losing $1.14, or 4.32 percent, on Friday on heavy volume of 4.6 million shares traded on the Nasdaq stock market.
GM shares stand at $45.40, after gaining 77 cents, or 1.73 percent, on moderate volume of almost 2.3 million shares. Shares of El Segundo, Calif., -based Hughes will open at $15.35, after falling 5 cents, or 0.32 percent, on Friday on heavy volume of 4.6 million shares.
Shares of both GM and its subsidiary Hughes Electronics are traded on the New York Stock Exchange.
(Reported by Chris H. Sieroty in Washington)
