DirecTV Buys Pegasus Satellite8/02/2004 5:11 AM Eastern
DirecTV Inc. has agreed to pay $875 million in cash for the outstanding assets of Pegasus Satellite Television Inc., the main direct-broadcast satellite arm of Pegasus Communications Corp.
The payment reflects full satisfaction and the dismissal of all claims between the parties, including the $63 million judgment entered in May in favor of DirecTV against Pegasus. Taking into account this judgment, the aggregate purchase price is approximately $938 million.
Pegasus has been reselling DirecTV service primarily in rural areas for years. But the two companies have been embroiled in litigation for the past five years concerning Pegasus’ right to distribute DirecTV programming.
About two months ago, Pegasus sued DirecTV and the National Rural Telecommunications Cooperative, claiming that the two parties had acted “independently and in concert in an effort to destroy Pegasus.”
Pegasus filed for Chapter 11 bankruptcy protection June 2.
“We believe that this will allow Pegasus Satellite's bankruptcy to be resolved quickly and with the least continued risk to creditors,” Pegasus chairman Marshall Pagon said in a prepared statement.
“Most important, these agreements assure that Pegasus Satellite Television's over 1 million subscribers throughout the United States will continue to receive uninterrupted delivery of DirecTV programming and that the sale to DirecTV will be managed smoothly and without disruption of their satellite service,” he added.
According to a press release, the DirecTV acquisition has been approved by Pegasus’ creditors committee and is subject to approval by the bankruptcy court. The bankruptcy court is expected to hold a hearing on the deal in late August, and the transaction is expected to be completed within the next four to six weeks.
DirecTV expects to migrate Pegasus’ 1.08 million customers to its rolls within 30-45 days after court approval.
The deal will give DirecTV access to about 10 million subscribers in Pegasus territory and help to bolster its presence in rural areas.
“The number of subscribers to DirecTV services in rural areas has steadily declined in the past fewyears, and this will enable us to reverse that trend and grow our subscriber base in these areas going forward,” DirecTV chairman Chase Carey said in a prepared statement.
Pegasus stock was priced at $20.95 each at 11:33 a.m., up 84 cents per share.