Hughes Electronics Gets PrimeStar in Fire Sale

The deal is finally done.

As originally reported by skyreport.com on January 5, DirecTV parent Hughes Electronics has announced its planned purchase of all PrimeStar assets. In a complicated, two-part deal valued at approximately $1.82 billion, Hughes will acquire the PrimeStar 2.3 million subscriber base mid-powered DBS business plus the related Tempo high-power satellite assets.

Payment for the Tempo assets, which include 11 frequencies at 119 degrees, an in-orbit (though slightly damaged) Tempo satellite plus a second, already built Tempo satellite, will total approximately $500 million in cash. For its mid-power business, PrimeStar will receive about $1.32 billion in cash and stock. This effectively values existing PrimeStar subscribers at slightly less than $575 each, a fire-sale price reflecting the extensive damage inflicted on the service by both the Department of Justice and its own cable-company partners.

For DirecTV, the deal represents a major financial coup which will immediately catapult the DBS-leader into third place among all U.S. multichannel providers, with only cable giants TCI and Time Warner outranking it.

According to DirecTV CEO Eddy Hartenstein, the deal could close "in a matter of months." The transactions have already been approved by the Boards of Directors of Hughes and PrimeStar, but remain subject to approval by the Board of Directors of General Motors, the consent of certain PrimeStar lenders and receipt of appropriate regulatory and antitrust approvals. Following the DirecTV takeover, no new PrimeStar subscribers will be added to the system as the DBS leader begins an expected 24 to 36 month transition period, during which existing PrimeStar customers will be moved to the DirecTV system.

Go to January 22, 1999, edition of SkyREPORT.COM News Headlines.