Ergen Lines Up $2.75B To Round Out Funding11/11/2001 7:00 PM Eastern
After only a week, EchoStar Communications Corp. chairman Charlie Ergen secured the final piece of financing for his pending $25.8 billion acquisition of DirecTV Inc. parent Hughes Electronics Corp.
Last Monday, EchoStar said it secured $2.75 billion in financing from Credit Suisse First Boston Corp. The short-term loan was the final piece of a $5.5 billion cash component in the No. 2 direct-broadcast satellite company's bid for Hughes and DirecTV, the No. 1 provider.
Earlier, Deutsche Bank AG had committed $2.75 billion to the deal, but Hughes parent General Motors Corp. had to provide the other half through a short-term bridge loan secured by Ergen's personal holdings in EchoStar.
EchoStar had lined up UBS Warburg LLC for the other half of the $5.5 billion cash requirement, but rejected the loan after Warburg insisted on a standard clause that would allow them to back out of the deal in the case of a "material adverse change."
The CS First Boston commitment replaces that GM bridge loan. It is expected that both the CS First Boston and Deutsche Bank bridge loans will be replaced with long-term financing.
EchoStar emerged as the winner for Hughes on Oct. 28, after rival bidder News Corp. dropped out of the running. The EchoStar-Hughes merger — which would create a 16.7-million-subscriber satellite powerhouse — must still be approved by Hughes shareholders and federal regulators.
According to the deal, EchoStar will exchange 0.73 shares of its stock for every share of Hughes. In addition, GM will receive $4.2 billion in cash and options for about 100 million shares of EchoStar stock, worth another $1.3 billion.
The deal valued Hughes at about $18.44 per share, a premium of 20 percent over its Oct. 26 close of $15.35. EchoStar stock rose 93 cents per share on Nov. 6, closing at $24.38. Hughes closed at $13.96, up 45 cents.