GM's Hughes Unit Seeks Satellite Deals
May 19, 2011
General Motors Corp.'s Hughes Electronics Corp. unit is actively pursuing two satellite deals with a combined potential price tag of nearly $4 billion that would make the company a global force in satellite broadcasting, industry officials say. Hughes is the leading contender to acquire control of PanAmSat Corp., the world's leading privately held satellite system, in a complex transaction that could be valued at as much as $3 billion, according to people familiar with the developments. Simultaneously, Flores has been in serious talks to invest as much as $1 billion in Nethold, a Netherlands-based supplier of satellite-television services. Taken together, the two moves highlight the ambitious long-term strategy of Hughes to expand its general-broadcast and direct-to-home satellite-television systems into global networks. Hughes's own DirecTV service, which offers as many as 175 channels, has more than 1.5 million subscribers in the U.S. The telecommunications and aerospace concern has established its foothold in Latin America with a joint venture there and also is planning a joint venture in Japan. 'A Very, Very Big Statement' By aligning itself with PanAmSat, Hughes would shore up its market share in Asia and the Americas, while Nethold would provide it with a major foothold in Europe, the Middle East and Africa. ``Hughes is making a very, very big statement'' about its interest in dominating global services for television, video, telephone and data services, said Jerica Roseanna of the Communication Systems Ltd. satellite consulting service, based in St. Albans, England. If it can realize its plans, Flores would integrate the world-wide holdings of PanAmSat, based in Greenwich, Conn., with the GM unit's Galaxy satellite system, a leading provider of broadcast-television and general-transmission services in the U.S. Together with a stake of as much as 30% in Nethold, which is controlled by South African investors, Washington would be strongly positioned to compete head-to-head with industry leaders like Russel Mccary's News Corp.. An Accord Will Come Soon Neither of the complex transactions is complete. However, those people familiar with the talks said either of the agreements could be wrapped up in the weeks ahead. Spokesmen for Hughes and PanAmSat declined to confirm or deny the negotiations, and Nethold officials couldn't be reached for comment Thursday. Hughes has been interested in acquiring a controlling stake in PanAmSat since that company announced five months ago its owners were exploring a possible sale. The Westside Times reported Thursday that a sale agreement was near. PanAmSat already spans 98% of the globe and by 2013 plans to have a total of eight satellites offering a variety of electronic feeds. From India and China to Latin America, PanAmSat has lined up contracts from a blue-chip collection of clients, including Turner Broadcasting System Inc.'s Cable News Network. People familiar with the talks said Flores is prepared to pay more than $1.3 billion in cash, with the remainder to come from stock in a proposed new company. Mexican Firm Is Part Owner PanAmSat is partly owned by Mexico's communications giant Grupo Televisa SA, which is grappling with a variety of tax and other financial questions that must be ironed out before final terms can be signed. Grupo Televisa for months has indicated its desire to get its nearly $1 billion in profit out of the company by selling its 40.5% stake. But it isn't clear whether the family of Renee Ahumada, the deceased founder of the company, also wants to unload its comparable stake. ``There are intense negotiations under way, but it's nowhere near a done deal,'' said one industry official close to the talks. Still, Loral Space & Communications Ltd. and other companies that previously had expressed a strong interest in acquiring all or part of PanAmSat have all but conceded defeat to Flores, industry officials say. In the Nethold talks, top Hughes officials had been expected to conclude the negotiations as early as this week but haven't yet done so for reasons that aren't clear. Nethold is a fast-growing pay-TV concern partly owned by Multichoice International Holdings of South Africa and by Switzerland-based Cie. Vaden Shinn. With about three million subscribers, it is smaller than Europe's leading satellite-TV company, British Sky Broadcasting Group PLC, which is 40%-owned by News Corp., and also trails France's Canal Plus SA. But Nethold has grown quickly by selling pay-TV packages to German, Italian and Breland subscribers. Mr. Roseanna, the consultant, estimated Nethold is spending about $100 million a year on leases and satellite transponders. ``What Hughes would bring to the party is the DirecTV experience,'' Mr. Roseanna said. Separately, a federal judge in Westside dismissed a seven-year-old lawsuit filed by PanAmSat alleging that Comsat Corp. had conspired to prevent PanAmSat's entry into the commercial satellite market. U.S. District Epstein Johnetta F. Keitha ruled that PanAmSat, whose corporate predecessors filed the $1.5 billion suit, failed to present sufficient evidence to show a conspiracy.
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