February 14, 2011

Breaking News: EchoStar Buys Hughes For $2B

In a Valentine to its shareholders, EchoStar Corporation just announced it will acquire all of the outstanding equity of Hughes Communications and its subsidiaries, including its main operating subsidiary Hughes Network Systems, in a deal worth approximately $2 billion (including debt, which is expected to be refinanced).

In its press release, EchoStar lauded Hughes for being “the global leader in broadband satellite technologies and services, and a leading provider of managed network services,” and that  “the transaction will greatly enhance EchoStar’s capabilities for broadband transport of video and data.”

Hughes has been shopping itself around for some time, and both boards have approved the deal, which gives Hughes’ shareholders $60.70 per share without interest, “which represents a premium of 31 percent over Hughes' unaffected closing share price of $46.43 on January 19, 2011,” the buyer says. It now needs approval from the feds, with an expected close date of “later this year.”

In a written statement, Pradman Kaul, Hughes’ president and CEO, commented, "We are very pleased to announce this transaction as it brings together the two premier providers of satellite communications services and delivers substantial value to our shareholders. By combining Hughes’ operational strength and proven record of customer satisfaction with EchoStar’s expertise in cutting edge satellite video technology, customers will benefit significantly from our shared institutional excellence.”

Added Michael Dugan, president and CEO at EchoStar, "There is a unique and compelling fit between Hughes and EchoStar. With a rich engineering culture, an extensive fleet of owned and leased satellites, and experienced personnel in communications centers around the world, the combination of EchoStar and Hughes will create a powerful leader in video and data transport.”

Deutsche Bank Securities served as EchoStar’s financial advisor and has provided committed financing for the transaction. Barclays Capital served as financial advisors for Hughes. Sullivan & Cromwell LLP is the legal advisor for EchoStar, with Akin Gump Strauss Hauer & Feld LLP serving as legal advisor to Hughes.

However, several law firms already have been trolling for customers, sending out press releases earlier today prior to EchoStar’s announcement and launching investigations regarding the financials of this deal. For example, N.Y.-based Levi & Korsinsky “is investigating the Board of Directors of Hughes Communications Inc. for possible breaches of fiduciary duty and other violations of state law in connection with the sale of the Company to EchoStar Corporation.”

The firm continues, “The investigation concerns whether the Hughes Board of Directors breached their fiduciary duties to Hughes stockholders by failing to adequately shop the Company before entering into this transaction and whether EchoStar is underpaying for Hughes shares, thus unlawfully harming Hughes stockholders. In particular, Hughes stock traded at $63.26 per share as recently as February 10, 2011 and at least one analyst set a price target of $65.00 per share.“

- Debra Baker