Satellite operator PanAmSat Corp. and its majority owner, DirecTV Group Inc., agreed Tuesday to a sale of the unit to Kohlberg Kravis Roberts & Co., the world's biggest buyout firm, for $3.53 billion.
The deal is the latest move by Rupert Murdoch's News Corp. to pare El Segundo-based DirecTV -- the largest U.S. satellite television provider -- to its core business.
KKR will pay $23.50 a share in cash for PanAmSat.
KKR also will assume about $750 million in PanAmSat debt. DirecTV owns 80.5% of PanAmSat.
The offer is 6% below PanAmSat's closing price Monday, suggesting investors had expected a higher sale price. Shares of Wilton, Conn.-based PanAmSat sank on the news Tuesday, falling $1.49 to $23.30 on Nasdaq. DirecTV shares fell 8 cents to $17.40 on the New York Stock Exchange.
PanAmSat operates 29 satellites that deliver programming to cable TV systems and broadcast stations.
As part of the deal, DirecTV agreed to remain a major customer. PanAmSat is the No. 3 U.S. satellite operator.
It had been expected that DirecTV, formerly Hughes Electronics, would sell its PanAmSat stake after News Corp. bought a controlling 34% interest in DirecTV last year from General Motors Corp. for $6.6 billion in cash and stock.
"The sale of PanAmSat is a significant step toward the completion of our plan to transform the former Hughes corporate structure to a single business, with a single focus on DirecTV," DirecTV Chief Executive Chase Carey said. "The KKR offer, with its all-cash structure, provided the best value to the PanAmSat shareholders."
The deal is subject to regulatory approval and a vote of PanAmSat shareholders. It is expected to close in the second half of this year.
Led by Henry Kravis, 60, New York-based KKR has announced $9 billion of takeovers in the last six weeks, acting before interest rates rise and make purchases more expensive.
"KKR had been quiet for a long time, but there's only so long a firm that helped invent the business can be quiet," said Michael Madden, principal with buyout firm Questor Management Co. in New York. "You would expect them to come out swinging."
KKR said Monday that it would buy MG Technologies' Dynamit Nobel chemicals business for $2.7 billion.
Molly Morse, a KKR spokeswoman, declined to comment on the PanAmSat transaction.
Associated Press and Bloomberg News were used in compiling this report.