EchoStar Communications Corp. chairman Charlie Ergen made his play to merge
with competitor DirecTV Inc. public Monday in a meeting with Wall Street
analysts and a conference call with the press, following a letter sent late
Sunday to the board of General Motors Corp.
Ergen appeared to be looking for a sympathetic ear to help sway investor
opinion that Ergen's bid to buy Hughes Electronics Corp. from GM for $32 billion
in stock would be a better value than what News Corp. chairman Rupert Murdoch
could bring to the table.
Murdoch has been negotiating with GM for months to merge Hughes with the
News' SkyGlobal Networks division.
When news of a proposed SkyGlobal/Hughes merger was leaked to the press in
the past, Hughes shareholders have generally reacted unfavorably.
In Monday's trading, share prices for Hughes stock rose 3.51 percent, to
$20.04 per share.
EchoStar is offering an immediate 18 percent premium for each share of Hughes
Ergen promised the stock for a combined company would see an additional boost
over the next few years due to substantial synergies from a combined
direct-broadcast satellite company.
There was no cash component to EchoStar's bid issued to the GM board late
Sunday, but Ergen told analysts Monday that he would be willing to consider one
if GM said it was necessary. Ergen said he had offered $5-1/2 billion in cash as
part of a previous proposal that never made it past the discussion stages with
DirecTV, Hughes and GM executives.
In the proposed tax-free transaction, Hughes shareholders would wind up with
two-thirds of the combined company, and Ergen would retain one-third.
Ergen noted that it would be hard for him to give up super-voting shares in
the company he'd built over the past 20 years. 'This is the only deal in my
lifetime I would give up control for,' Ergen said.
Consumers would be better off if such a deal were allowed to go through,
Ergen said, claiming that a single, strong DBS company would help keep cable
rates in check.
To answer antitrust concerns, Ergen said he would promise a national pricing
structure so that rural subscribers would never have to pay more for programming
than their counterparts in markets with strong cable competition.
EchoStar is clearly more interested in DirecTV's U.S. DBS operations than its
other assets, Ergen admitted. It's unclear whether the company would keep
PanAmSat or Hughes Network Systems following a merger. Ergen said he had no
interest in running DirecTV Latin America or other international DBS
Ergen dismissed speculation that his bid was just a last-minute attempt to
hamper Murdoch's DirecTV take-over.
'I don't put a suit on unless I'm serious,' he told the analysts in New
A spokesman for News Corp. declined to comment on EchoStar's bid Monday.
GM spokeswoman Toni Simonetti confirmed that the GM board would hold a
regularly scheduled board meeting Tuesday, where it would likely discuss the
status of the negotiations with News Corp.
Simonetti said that GM is reviewing the EchoStar proposal and will make a
response at the appropriate time.
'Our board would give full consideration to any bona fide offer,' Simonetti
Ergen acknowledged that much of DirecTV's management would likely go in the
event of a merger, but added that a combined company could actually add jobs in
operations, including call center agents.
Location for the combined company's headquarters would be up for discussion,
although Ergen said he prefers to keep the company in Denver area. EchoStar is
headquartered in Littleton, Colo.; and DirecTV has its main offices in the Los
Angeles suburb of El Segundo. DirecTV's Home Services division is located in
The government approval process for a merger could take six months to a year,