EchoStar Corp. said Monday that it has agreed to purchase broadband satellite service Hughes Communications for $1.3 billion.
EchoStar, which split from Dish Network in 2008, builds set-top boxes and satellites for the satellite TV giant. EchoStar also includes Sling Media, maker of the Slingbox set-top box which allows cable and satellite subscribers to remotely access programming from their homes via high-speed Internet connections. Hughes Communications is owned by private equity giant Apollo Management.
In a statement, EchoStar said the deal will be valued at about $2 billion, including Hughes debt that is expected to be refinanced in connection with the transaction.
Under terms of the deal, Hughes shareholders will receive $60.70 per share for each share they own, a 31% premium to Hughes' closing price of $46.13 on Jan 19. But the price is actually a 1.7% discount to Hughes' closing price of $61.78 on Feb. 11, as speculation that Apollo may sell its stake has run high in the past few months. Hughes stock is up about 50% since Dec. 31.
The deal is expected to close later his year, subject to certain conditions.
The deal comes as EchoStar chairman Charlie Ergen - also chairman of Dish Network - has made several moves to accumulate wireless spectrum and satellite capacity. Earlier this month, Dish Network agreed to purchase DBSD for $1 billion, which controls about 20 Megahertz of S-band wireless spectrum. EchoStar also is said to be in a leading position among the debtholders of TerreStar Netowrks, which also owns a 20-MHz bock of S-band spectrum.
After the DBSD announcement, BTIG Research analyst Walter Piecyk issued a report stating that Ergen was amassing spectrum that would rival wireless telephony giants Sprint and T-Mobile. In his report, Piecyk wondered aloud about Ergen's plans for the spectrum.
Hughes owns Hughes Network Systems, which provides broadband satellite networks for enterprises, governments small businesses and consumers.
"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," Hughes CEO Pradman Kaul, said in a prepared statement.
EchoStar said the deal is a compelling fit.
"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," EchoStar CEO Michael Dugan said in a statement.
