New York – News Corp. czar Rupert Murdoch kept his eyes on the prize – DirecTV – and last week finally struck a deal to take control of the U.S. satellite TV provider in a $6.6 billion cash and stock swap.
Fundamentally, the pact has News Corp. paying $6.6 billion for 34 percent of Hughes stock. Of that 34 percent, 19.9 percent comes from General Motors’ share and 14.1 percent from public shareholders and GM’s pension fund.
The deal ends a three-year ordeal that saw DirecTV, the nation’s largest direct broadcast satellite provider, and News Corp. struggle through several different business relationships, sometimes taking the form of a courtship and at other times a bidding war. Adding complexity to the issue were News Corps.’s constant negotiations with federal regulators.
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, 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 interest equity interest in Fox will increase to 82 percent. In addition News Corp. will also get Hughes’ 81 percent interest in satellite manufacturer PamAmSat Corp. and Hughes Networks Systems, a provider of broadband-satellite 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.
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 in U.S. subscribers, the most in the U.S., would be added to News Corp.’s European, Asian and Latin American satellite services.
When asked about concerns that News Corp.’s DirecTV deal with give it far too much power to press its well-known conservative political agenda, 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.’
The DirecTV deal ends a two-decade effort by Murdoch and News Corp. to own a direct broadcast satellite service in the U.S., 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 dropped out. – Additional reporting by Mike Farrell of TWICE’s sister publication Multichannel News