just4funnc
08-05-2004, 08:59 PM
After two months of legal wrangling in Maine federal courts, and after nearly five years of overall litigation between the sides, Pegasus and DirecTV agreed to end their skirmish Monday in a deal that will allow the satellite TV service to obtain Pegasus' subscribers in rural areas.
DirecTV said it will pay $875 million in cash, subject to certain adjustments, for Pegasus' DBS assets, including subscribers acquired through Pegasus' National Rural Telecommunications Cooperative affiliates. The payment reflects the dismissal of all claims between the parties, including a $63 million judgment entered in May in favor of DirecTV against Pegasus, the satellite TV company said.
Taking into account the judgment, the aggregate price is about $938 million.
Chase Carey, president and CEO of DirecTV, said, "This agreement gives DirecTV a true ability to reach every home in America. DirecTV will have unencumbered access to an additional 10 million households and will be able to offer consumers in those rural markets the full benefits of DirecTV programming, pricing and service."
Carey said the number of DirecTV subscribers in rural areas has declined during the past few years, "and this will enable us to reverse that trend and grow our subscriber base in these areas going forward." He added, "This transaction also has significant financial benefits including significant increased short-term cash flow and long-term value from both increased subscribers and cash flow."
Pegasus CEO Marshall Pagon said the deal with DirecTV will allow for a quick resolution of Pegasus Satellite Television's case in Maine bankruptcy court. "Most importantly, these agreements assure that Pegasus Satellite Television's over 1 million subscribers throughout the U.S. will continue to receive uninterrupted delivery of DirecTV programming and that the sale to DirecTV will be managed smoothly and without disruption of their satellite service," Pagon added.
Pagon also thanked employees and management for their hard work. "In little over 10 years, and in defiance of widespread skepticism that satellite television could ever successfully compete with cable, they built a sound and successful business serving over 1 million rural subscribers in 41 states," he said.
The NRTC said it was happy DirecTV and Pegasus came to a deal. This was the last step in finalizing the agreement between NRTC and DirecTV that will terminate their joint DBS sales effort - which was first announced June 1 - and ends all litigation among the parties, the cooperative said.
Said NRTC President and CEO Bob Phillips. "Every one of our DBS members has chosen to quantify the great value in the businesses they've built over the last decade by accepting this deal, and the vast majority of them have also decided to continue on as retailers and services of DirecTV to our subscribers."
The June 1 agreement ends the original NRTC/DirecTV contract, and compensates NRTC DBS members for ending their exclusive territorial rights for selling the satellite TV service, while allowing them to continue to sell DirecTV through different options. Pegasus faced an Aug. 31 deadline for termination of the original NRTC/DirecTV DBS sales deal.
In addition to the DirecTV deal, Pegasus and a committee of unsecured creditors working on Pegasus Satellite's bankruptcy reached an agreement on the sale of TV stations owned by Pegasus Satellite to Pegasus Communications, subject to higher and better offers. The sale of the satellite TV assets and settlement with DirecTV as well as the sale of the TV stations are subject to bankruptcy court approval and applicable antitrust filings and approvals.
Street Reacts to DirecTV/Pegasus Deal
Wall Street reacted favorably to news that Pegasus and DirecTV will settle their litigation, and that DirecTV will buy Pegasus' subscribers in rural areas through a $938 million deal.
They also noted that the move changes the competitive landscape for satellite TV.
Tom Eagan of Oppenheimer and Co. said he views the deal struck between DirecTV and Pegasus earlier this week as a positive. However, the analyst said the settlement and buyout is a negative for satellite TV competitor EchoStar, given that the deal "takes away a lot of the low hanging fruit in terms of subscribers that had been churning away from Pegasus to DISH," Eagan said.
Pegasus lost an average of 40,000 subs a quarter during the past six quarters, Eagan said, and he estimated that 80 percent of those customers went to DISH Network. That implies about 128,000 subscribers for DISH Network during the past year, Eagan said.
"While true that not all 100 percent of Pegasus subs will go to DirecTV, we believe that a majority of them will," Eagan said.
Schwab Soundview Capital Markets said it also views the Pegasus/DirecTV deal as a positive, especially on the money side. The firm said it expects up to $300 million in pre-SAC (subscriber acquisition cost) contribution in 2005 from Pegasus subscribers for DirecTV.
In other analyst notes, Schwab Soundview reiterated its "outperform" rating on DirecTV and raised its price target to $24 from $23. The firm said its marketing data through June indicates a third consecutive record quarter for DirecTV marketing on TV, and that DirecTV is marketing at three times the levels seen last year.
And Wachovia Securities, in a note discussing Cox Enterprise's move to take cable operator Cox Communications private, said similar transactions may happen at EchoStar and DirecTV. Some on Wall Street, including Eagan, disputed that suggestion.
"Although DISH is down 18 percent year-to-date, we think it is unlikely that Charlie Ergen (CEO at EchoStar) will take the company private," Eagan said. (Please see our story below on Wall Street reaction to the Cox buyout news.)
DirecTV said it will pay $875 million in cash, subject to certain adjustments, for Pegasus' DBS assets, including subscribers acquired through Pegasus' National Rural Telecommunications Cooperative affiliates. The payment reflects the dismissal of all claims between the parties, including a $63 million judgment entered in May in favor of DirecTV against Pegasus, the satellite TV company said.
Taking into account the judgment, the aggregate price is about $938 million.
Chase Carey, president and CEO of DirecTV, said, "This agreement gives DirecTV a true ability to reach every home in America. DirecTV will have unencumbered access to an additional 10 million households and will be able to offer consumers in those rural markets the full benefits of DirecTV programming, pricing and service."
Carey said the number of DirecTV subscribers in rural areas has declined during the past few years, "and this will enable us to reverse that trend and grow our subscriber base in these areas going forward." He added, "This transaction also has significant financial benefits including significant increased short-term cash flow and long-term value from both increased subscribers and cash flow."
Pegasus CEO Marshall Pagon said the deal with DirecTV will allow for a quick resolution of Pegasus Satellite Television's case in Maine bankruptcy court. "Most importantly, these agreements assure that Pegasus Satellite Television's over 1 million subscribers throughout the U.S. will continue to receive uninterrupted delivery of DirecTV programming and that the sale to DirecTV will be managed smoothly and without disruption of their satellite service," Pagon added.
Pagon also thanked employees and management for their hard work. "In little over 10 years, and in defiance of widespread skepticism that satellite television could ever successfully compete with cable, they built a sound and successful business serving over 1 million rural subscribers in 41 states," he said.
The NRTC said it was happy DirecTV and Pegasus came to a deal. This was the last step in finalizing the agreement between NRTC and DirecTV that will terminate their joint DBS sales effort - which was first announced June 1 - and ends all litigation among the parties, the cooperative said.
Said NRTC President and CEO Bob Phillips. "Every one of our DBS members has chosen to quantify the great value in the businesses they've built over the last decade by accepting this deal, and the vast majority of them have also decided to continue on as retailers and services of DirecTV to our subscribers."
The June 1 agreement ends the original NRTC/DirecTV contract, and compensates NRTC DBS members for ending their exclusive territorial rights for selling the satellite TV service, while allowing them to continue to sell DirecTV through different options. Pegasus faced an Aug. 31 deadline for termination of the original NRTC/DirecTV DBS sales deal.
In addition to the DirecTV deal, Pegasus and a committee of unsecured creditors working on Pegasus Satellite's bankruptcy reached an agreement on the sale of TV stations owned by Pegasus Satellite to Pegasus Communications, subject to higher and better offers. The sale of the satellite TV assets and settlement with DirecTV as well as the sale of the TV stations are subject to bankruptcy court approval and applicable antitrust filings and approvals.
Street Reacts to DirecTV/Pegasus Deal
Wall Street reacted favorably to news that Pegasus and DirecTV will settle their litigation, and that DirecTV will buy Pegasus' subscribers in rural areas through a $938 million deal.
They also noted that the move changes the competitive landscape for satellite TV.
Tom Eagan of Oppenheimer and Co. said he views the deal struck between DirecTV and Pegasus earlier this week as a positive. However, the analyst said the settlement and buyout is a negative for satellite TV competitor EchoStar, given that the deal "takes away a lot of the low hanging fruit in terms of subscribers that had been churning away from Pegasus to DISH," Eagan said.
Pegasus lost an average of 40,000 subs a quarter during the past six quarters, Eagan said, and he estimated that 80 percent of those customers went to DISH Network. That implies about 128,000 subscribers for DISH Network during the past year, Eagan said.
"While true that not all 100 percent of Pegasus subs will go to DirecTV, we believe that a majority of them will," Eagan said.
Schwab Soundview Capital Markets said it also views the Pegasus/DirecTV deal as a positive, especially on the money side. The firm said it expects up to $300 million in pre-SAC (subscriber acquisition cost) contribution in 2005 from Pegasus subscribers for DirecTV.
In other analyst notes, Schwab Soundview reiterated its "outperform" rating on DirecTV and raised its price target to $24 from $23. The firm said its marketing data through June indicates a third consecutive record quarter for DirecTV marketing on TV, and that DirecTV is marketing at three times the levels seen last year.
And Wachovia Securities, in a note discussing Cox Enterprise's move to take cable operator Cox Communications private, said similar transactions may happen at EchoStar and DirecTV. Some on Wall Street, including Eagan, disputed that suggestion.
"Although DISH is down 18 percent year-to-date, we think it is unlikely that Charlie Ergen (CEO at EchoStar) will take the company private," Eagan said. (Please see our story below on Wall Street reaction to the Cox buyout news.)