General Motors subsidiary Hughes Electronics, and EchoStar Communications Corporation have reached an agreement to scrap their proposed merger. The move follows FCC opposition to the proposed $19 billion merger of the two largest satellite TV operators in North America.
The companies scrapped the merger agreement due to action taken by the US Department of Justice, 23 states, the District of Columbia and Puerto Rico to block the merger, as well as the Federal Communications Commission’s (FCC) decision to send the merger application to a hearing. The FCC feared the combination of the two largest satellite TV operators in the US would create a duopoly between the local cable operator and the combined DirecTV/EchoStar in almost all areas reached by cable. As such, a court would be unlikely to support a merger because mergers forming a duopoly out of more diverse markets are not favored.
Dish Network parent company EchoStar will now pay Hughes, owner of DirecTV, $600 million in cash of termination fees. Hughes will retain its 81% ownership position in PanAmSat. EchoStar will also take an approximate $700 million write off in the fourth quarter for the merger breakup fee and other related merger expenses
We continue to believe that the proposed merger would have been a victory for consumers nationwide, and for our shareholders. We worked hard on it to get the required regulatory approval and are disappointed that we were not able to complete the merger, said Hughes President and Chief Executive Officer Jack A. Shaw. However, since the merger couldn’t be completed, we concluded that this settlement is the best alternative for Hughes and places us in the best position to move ahead with our business.
We are appreciative of all the support we received and the opportunity to present the merger proposal to regulators. Obviously, we are disappointed in the final outcome. However, EchoStar will continue to seek alternative, innovative ways to provide competition to the rapidly consolidating cable industry and to provide more choices for all consumers, said EchoStar Chairman and Chief Executive Officer Charles Ergen.