EchoStar Communications Corp. has reached an agreement to repurchase Vivendi Universal's 10 percent stake in the direct-broadcast satellite giant for about $1.07 billion.
The purchase price is about 30 percent less than what Vivendi paid for it a year ago -- $1.5 billion.
In a press release Wednesday, EchoStar said Vivendi's preferred shares in the company would be converted into 57.6 million shares of common stock. EchoStar would then immediately purchase those shares for $18.50 each. The deal is expected to close Dec. 23.
Also in the statement, EchoStar said the elimination of Vivendi's contingent-value rights as part of the original deal would result in a $170 million noncash gain in the fourth quarter for the DBS provider.
In a research report, Deutsche Bank Securities cable and satellite analyst Karim Zia said the deal will likely be funded out of EchoStar's $3.6 billion cash reserves, set aside to fund its failed merger with Hughes Electronics Corp.
The Vivendi investment was originally needed to help fund that merger, which was blocked by federal regulators and officially terminated by both parties earlier this month.
EchoStar has agreed to pay Hughes a $600 million breakup fee, but it was freed from its previous obligation to purchase Hughes' PanAmSat Corp. subsidiary for $2.7 billion.
"EchoStar will come out of the attempted merger with Hughes at essentially no cost and a significantly improved competitive position, reinforcing EchoStar management's strategic savvy," Zia wrote.