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EchoStar bids $30.4 B for Hughes Electronics

Sun, 08/05/2001 - 8:00pm
Anne Kerven

Seemingly miffed at Hughes Electronics Corp.'s refusal to discuss a sale, EchoStar Communications Corp.'s Charles Ergen dropped a note to parent General Motors' board with an unsolicited $30.4 billion bid for the Hughes unit.

The tax-free, all-stock transaction would create an entity poised to compete with the swiftly merging cable industry, said Ergen, EchoStar chair and CEO.

Observers say Ergen timed the letter to precede a GM board meeting tomorrow, where members were to discuss a potential merger with News Corp.

Under the proposed deal, EchoStar would exchange 0.75 shares of its common stock for each GMH share, or the equivalent of $22.83 per GMH share, based on EchoStar's Aug. 3 closing price of $30.44 a share, Ergen said, adding that the amount represents an 18 percent premium for GMH share holders based on GMH's Aug. 3 closing price. EchoStar also would assume $1.9 billion of Hughes' debt.

GMH shareholders and GM would own 66 percent of the combined company, and EchoStar shareholders, 34 percent.

Ergen outlined prior offers, where, "We were prepared to structure the transaction so that (GM) would have been able to receive a significant portion of its consideration in cash," a deal that would have allowed GM to require EchoStar to buy PanAmSat from Hughes prior to merging. EchoStar likewise would have established joint operating agreements with Hughes before the merger, Ergen said.

Hughes' refusal to talk led EchoStar to the all-stock proposal, he said.

Observers say antitrust concerns led to Hughes' and GM's rejection of a merger with EchoStar.

Ergen also pointed out a merger would create a company set to compete with the cable industry.

"The new company would have enhanced scale to compete effectively against the large U.S. cable and broadband providers — a critical factor given increasing consolidation in the cable industry," he said in a statement.

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