Sunday, December 5, 2004

SkyTerra to Acquire 50% of Hughes Network Systems

SkyTerra Communications will acquire 50% of a new entity that will contain the assets of Hughes Network Systems (HNS) in a transaction that values HNS at approximately $360 million. HNS, which is based in Germantown, Md., is a wholly owned subsidiary of The DIRECTV Group. After two separate divestitures completed earlier this year, HNS is primarily focused on providing broadband satellite networks and services to enterprises via its core enterprise Very Small Aperture Terminal (VSAT) business. HNS' other businesses include Consumer DIRECWAY, Mobile Satellite and Carrier Networks, as well as the portion of the Spaceway satellite platform that is under development and that will not be used in DIRECTV's direct-to-home satellite video broadcasting business.

Substantially all of HNS' assets and liabilities will be contributed to a new limited liability company and, upon closing, 50 percent of the ownership of the new company will be purchased by SkyTerra. The DIRECTV Group will receive approximately $251 million in cash at closing, subject to certain adjustments, and 300,000 shares of SkyTerra common stock, and will retain a 50 percent interest in the new company.

The transaction does not include rights to the first two satellites designed for the Spaceway program, Spaceway 1 and 2, which have been redeployed to support DIRECTV's direct-to-home satellite broadcasting business and are scheduled for launch next year. However, the transaction does include rights related to the third Spaceway satellite which is currently under construction, as well as rights to a contemplated fourth Spaceway satellite and certain ground equipment and related intellectual property.

The companies said the deal is expected to close in the first half of 2005, subject to certain regulatory approvals, receipt of financing and other closing conditions.

  • SkyTerra Communications is an affiliate of Apollo Management, L.P., a New York-based private equity firm.


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