Murdoch Gets Control Of DirecTV For $6.6B
By Steve Smith -- TWICE, 4/21/2003
NEW YORK — News Corp. czar Rupert Murdoch kept his eyes on the prize — DirecTV — and finally struck a deal to take control of the U.S. satellite TV provider for $6.6 billion in cash and stock.
Sometimes a courtship, other times a bidding war with constant negotiations, the agreement between News Corp. and DirecTV's parent company Hughes Corp. ends a three-year odyssey in pursuit of the nation's largest direct broadcast satellite TV provider.
News Corp. winds up paying a total of $6.6 billion for a 34 percent stake in Hughes. Of that, 19.9 percent comes from General Motors' super-voting shares, which controls over half of Hughes shareholder votes, and 14.1 percent from public shareholders and GM's pension fund.
After the deal is closed, which is expected by the end of the year, Murdoch will become chairman of DirecTV parent Hughes Electronics and former News Corp. co-chief operating officer Chase Carey will become president/CEO.
Eddy Hartenstein, currently Hughes' corporate senior VP, will be vice chairman and report to Carey. When the first DirecTV deal fell through, long-time News Corp. executive Carey left the company.
As part of the deal, News Corp. will sell its stake to its Fox Entertainment Group subsidiary in exchange for a $4.5 billion promissory note and about 74.2 million shares in Fox. As a result, News Corp.'s equity interest in Fox will increase to 82 percent. In addition News Corp. will also get Hughes' 81 percent interest in the PamAmSat satellite concern and Hughes Networks Systems, a manufacturer of DirecTV set-top decoders and provider of broadband-satellite systems and services.
Reportedly News Corp. hopes it has averted any possible problems with the Federal Communications Commission by pledging to provide open access to its programming to all suppliers and distributors.
When asked about concerns that News Corp.'s DirecTV deal would give it too much negotiating power in deals for Fox produced and distributed programming, the 72-year-old media mogul was quoted as saying, "We have every intention of being a fair player. We'll make our programming available to all satellite and cable providers."
News Corp. will now become the second-largest provider of pay-TV services to U.S. homes behind Comcast Corp. and reportedly may be ahead of AOL Time Warner in that regard. DirecTV's 11.3 million U.S. subscribers, the most by a satellite provider in the United States, would be added to News Corp.'s European, Asian and Latin American satellite services.
The DirecTV deal ends a two-decade effort by Murdoch and News Corp. to own a direct broadcast satellite service in the United States, and a three-year effort to buy DirecTV in particular. Three years ago, after more than a year of negotiation, News Corp. was very close to buying Hughes for about $25 billion. It was outbid at the last minute by DirecTV's arch-rival EchoStar Communications. But the FCC blocked the EchoStar/Hughes merger last December for anti-competitive reasons.
This time around News Corp. was in competition with Liberty, SBC and Cablevision Systems, the former owner of The Wiz, but they all eventually dropped out. — Additional reporting by Mike Farrell of TWICE's sister publication Multichannel News
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