Hughes Links Up With USSB
Hughes Electronics Corp., owner of DirecTV, said Monday it will acquire United States Satellite Broadcasting Co. for about $1.3 billion in cash and stock.
The price equals about $14.48 per USSB share, about a 50 percent premium over its closing price Friday of 9 5/8. The news sent USSB (USSB) stock soaring, up 3 5/8, or 32 percent, to 12 5/8 on heavy volume. Hughes (GMH) rose 1/2 to 38 3/4.
Hughes, a subsidiary of General Motors, said the acquisition will simplify purchase decisions for prospective consumers, allow it to provide Spanish-language service starting next year and achieve significant savings through the elimination of duplicate services such as billing and customer service.The deal would strengthen the company's position as the No. 1 satellite TV provider, combining its DirecTV news, music, sports, and superstation programming with USSB's offerings of premium movie channels such as HBO, Cinemax and Showtime. DirecTV has more than 4.3 million subscribers.
Under the agreement, each share of USSB can be exchanged for cash or Hughes stock equal in value to 0.3775 shares of Hughes, as long as Hughes stock remains within a range of $27.82 to $47.68 a share over the 20 daybefore the transaction closes. Based on Hughes' closing price of 38 1/4 on Friday, that would make the deal worth about $1.3 billion.The acquisition is expected to close in mid-1999, the company said.
Aside from cost savings, the deal will allow DirecTV to provide simplified consumer offerings and expand its 185-channel lineup to more than 210 channels. Unlike cable subscribers, dish owners who get DirecTV have to buy a separate package from USSB if they want to receive premium movie channels.
"This merger will simplify the purchase decision process for prospective subscribers at retail and enhance our programming lineup and packaging flexibility with the addition of premium programming, such as HBO and Showtime," said Eddy W. Hartenstein, president of DirecTV, in a statement.
"We also believe this transaction will strengthen DirecTV's brand awareness among consumers, and increase our already strong customer satisfaction ratings via a simplified and streamlined customer service experience," he said.
Written By Jeffry Bartash