News Corp whips up competition
concerns as EchoStar edges ahead
LONDON - EchoStar is understood to have edged into the lead in the race to acquire its larger rival, DirecTV, after it secured backing from Deutsche Bank.
General Motors is expected to decide tomorrow whether to sell its Hughes division, parent of DirecTV, to number two player EchoStar, or to bitter rival News Corporation.
For News Corp chairman, Rupert Murdoch, it is a prize he has long sought. He has been negotiating to buy DirecTV, which is the US's largest satellite TV company, for almost a year. He is said to be trying to raise concerns that a merger between EchoStar and DirecTV would result in a lengthy anti-trust investigation in an effort to close the deal.
The concerns are real. The competition authorities are almost certain to be worried that control of the US satellite TV market will fall into the hands of a single company sparking fears at GM of a potentially lengthy regulatory investigation.
Murdoch is desperate to break into the US market to help consolidate his satellite TV empire, which has operations in India, Japan, South America and the UK.
To back his case, Murdoch is said to have secured support from a number of congressmen including Senator Ernest F Hollings, Democrat of South Carolina and chairman of the Senate commerce, science and transportation committee; and Billy Tauzin, Republican of Louisiana and chairman of the House Energy and Commerce Committee.
The EchoStar deal is thought to be worth around $28bn (£19.6bn) and would amount to a straightforward takeover of Hughes. Hughes shareholders would get about 0.75 of an EchoStar share -- or $19.80 (£13.85) based on yesterday's closing prices -- in exchange for each Hughes share, which trade as a GM tracking stock.
EchoStar is throwing $5.5bn (£3.8bn) into the deal and has agreed to pay a $500m (£350m) break up fee and will pay $5bn (£3.5b) for Hughes satellite division PanAmSat.
The News Corp deal is said to be worth around $22bn (£15.4bn) and would be more complicated. News Corp, however, is promising investors the chance to own part of Murdoch's burgeoning satellite empire, which dominates the satellite TV market in the UK and Asia.
Hughes public shareholders would receive stock in a restructured Sky Global. This company would be created out of a reverse takeover of Hughes by the current Sky Global, which is Murdoch's holding company for his satellite assets.
Microsoft is set to inject $2.9bn (£2bn) into the deal and John Malone's Liberty Media will contribute around $1bn (£699m) to support of Murdoch's deal.
GM would receive $4.5bn (£3.1bn) in cash in return for most of its stake in Hughes while retaining a 4% stake in the newly merged company.
News Corporation has been ready to sign a deal since the summer, but EchoStar stepped in with a $30.4bn (£21.3bn) bid just as negotiations were drawing to an end
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