EchoStar Bids $30.4 Billion to Buy Hughes

EchoStar Communications Corp. renewed its bid Sunday to buy Hughes Electronics, offering $30.4 billion in stock and launching what could become a bidding war with News Corp. for control of the No. 1 satellite TV operator.

Hughes’ DirecTV satellite operation boasts 10 million subscribers and is becoming a significant pipeline for the delivery of super-fast Internet services.

Under terms of the new deal, EchoStar offered stock at $22.83 a share, an 18% premium to Friday’s close, to General Motors Corp., which owns 32% of Hughes. Echo-Star, operator of Dish Network satellite TV service, also would assume $1.9 billion in Hughes debt.

EchoStar’s proposal comes three weeks after GM rejected its previous offer for El Segundo-based Hughes. GM has been in discussions to merge its satellite assets with News Corp.’s for the last several months and was in negotiations as recently as last week.

In a letter to the GM board released Sunday, EchoStar Chief Executive Charles W. Ergen said the combination would “establish the only fully competitive alternative to the powerful U.S. cable/broadband providers.”

AT&T; Corp. and AOL Time Warner Inc. are the largest U.S. cable operators.

Ergen said EchoStar had identified $56 billion in savings that the deal would bring, including lower subscriber acquisition costs, better subscriber retention, elimination of duplicated expenses and higher advertising and interactive revenue as a result of a larger subscriber base and a broader national reach.

“We are aware of this proposal,” GM spokeswoman Toni Simonetti said. “We haven’t had a chance to review it yet. We’ll respond at the appropriate time.”

DirecTV has the nation’s largest satellite TV operation. EchoStar, based in Littleton, Colo., has 6 million subscribers to its Dish Network service. The combined companies would have more than 90% of the U.S. satellite TV market.

News Corp., which operates the Sky Global network in Europe, South America and Asia, wants DirecTV for a U.S. foothold. A News Corp. spokesman didn’t return a call for comment Sunday.

Terms of a Hughes deal with News Corp. have not been disclosed, but the complicated transaction probably would include cash investments from Microsoft and cable operator Liberty Media.

EchoStar’s surprise proposal is the latest in the protracted saga over Hughes. In May, Hughes’ board abruptly ousted its chairman, Michael T. Smith, who was seen as impeding the deal with News Corp., which was considered the more viable bidder, with the best chances of clearing regulatory hurdles and meeting the board’s demands for part of the deal to be in cash.

Last month, News Corp. decided to sell its Fox Family Worldwide cable division for $3.3 billion to build a cash war chest.

EchoStar’s petition to the GM board was necessary because, as Ergen said in his letter, “Hughes’ and DirecTV’s senior management have recently informed us that they do not intend to pursue further discussions with EchoStar.”

The earlier deal reportedly failed at least partly because of antitrust concerns. Ergen said in the letter that after “extensive review by antitrust experts,” including antitrust lawyer David Boies, EchoStar was confident it could obtain clearance.

Shares of EchoStar closed Friday at $30.44 on Nasdaq, off its 52-week high of $56.44 and up from a low of $20.50. News Corp., which owns most of Fox Entertainment Group, closed at $38.25 on the New York Stock Exchange, off a high of $57.50 in the last year and up from the low of $28.65. Shares of Hughes, which closed at $19.36 on the NYSE, have reached as high as $38 in the last year, but are barely up from a low of $17.55.