EchoStar-DirecTV merger bid ends with whimper … and cash payment
The final curtain fell today on the merger between DBS heavyweights EchoStar Communications and Hughes' DirecTV, with the two agreeing on an official settlement to terminate the deal that includes a cash payment of $600 million by EchoStar to Hughes. Also, as part of the settlement, Hughes will retain its 81 percent ownership in satellite broadcasting company PanAmSat.
The nation's two leading satellite pay TV services were compelled to reach such a settlement because the proposed merger between the two could not be realized within the time allotted under original terms of the merger agreement. The proposed deal hit a series of snags when submitted to various government channels for regulatory approval. The Department of Justice, 23 states, the District of Columbia and Puerto Rico all filed motions to block the merger, citing a lack of competition in the market for satellite TV. Most vocal against the deal were lobbyists from predominantly rural states, where pay TV access via cable is limited, and satellite TV remains the only pay television option available in many areas. In those places, a merged EchoStar-DirecTV would have been the only choice available to customers if the deal had gone through. Late guarantees by EchoStar Chairman Charles Ergen to fix pricing in rural areas, as well as a last ditch effort to create a third satellite provider via a deal with Cablevision Systems, could not save the ambitious merger effort.
As a result of today's agreement, EchoStar reported that it will write off nearly $700 million for the merger break-up fee and other merger related expenses.