NEW YORK — EchoStar chairman Charlie Ergen may have some help as he seeks to block Rupert Murdoch’s merger with DirecTV parent Hughes Electronics.
Swiss digital TV and tech company Kudelski said Tuesday that it is willing to raise about $1 billion in cash to back Ergen’s competing bid for the satcaster, which was made public over the weekend.
Meanwhile, a Hughes stockholder has filed suit in Delaware Chancery Court to block a deal between Hughes and News Corp. and force Hughes parent GM to hold an auction instead. Shareholder Debbie Wurzel alleges in the suit that GM is unfairly favoring a lower offer by News Corp. because it would pay cash even though holders would be better served by the stock swap proposed by EchoStar.
Ergen himself clearly intends to aggressively defend his proposed deal and started the offensive against News Corp. this week.
Brushing aside regulatory concerns over a merger of the nation’s No. 1 and No. 2 satellite companies, he indicated that an alliance between News Corp. and DirecTV could be much more dangerous. He cited foreign ownership and perils to consumers when a company owns both content and distribution — themes he’s likely to hit on consistently as he tries to derail Murdoch’s plans.
Ergen’s bid offered Hughes shareholders an 18% premium to last Friday’s closing price, although the premium has been eroded along with EchoStar stock over the past two days.
Uneven playing field
“GM has not conducted a fair auction for Hughes but rather has unjustifiably favored News Corp.,” shareholder Wurzel contends, asking a judge to grant the case class-action status on behalf of all stockholders and to halt any News Corp. transaction “that is not the result of an open auction process.”
Neither News Corp. nor GM have made public the terms of Murdoch’s offer, which is believed to include up to $7 billion in cash and notes along with stock.
GM, whose board met Tuesday, has not issued any formal statement in response to EchoStar’s unsolicited bid on Sunday. The automaker has reiterated that it will consider all bona fide offers and that it continues its discussions with News Corp.
By all accounts those talks, which had been dragging on for months, were in their final stages, although EchoStar’s move may delay a deal.
Reps for GM and News Corp. weren’t immediately available for comment.
EchoStar had made a previous offer with a cash component that Hughes rejected earlier this summer. Its latest bid, however, is all in stock, although Ergen said he’d be willing to inject some cash if needed.
Ergen said he will wait for a formal response from General Motors before engaging in further conversations with Kudelski or others.
A successful bid by EchoStar, which is Kudelski’s biggest single client for its NagraVision encryption and decoding equipment division, would increase Kudelski’s earnings by as much as 40%, said its chairman, Andre Kudelski. EchoStar accounts for 10%-20% of the division’s sales.
(Reuters contributed to this report.)