Hughes Got Unsolicited Bid Before Choosing EchoStar Offer, It Tells SEC

Hughes Communications received an unsolicited bid for the company from an unidentified direct competitor soon after starting negotiations on a potential sale, Hughes said in a proxy statement filed at the SEC. Hughes signed a tentative agreement in February to sell the company to EchoStar for $2 billion.

The unsolicited offer from a company identified only as “Bidder L” arrived Dec. 9, after discussions with 12 potential bidders, including EchoStar on Nov. 17 in a Washington meeting that included EchoStar Chairman Charles Ergen and CEO Michael Dugan, Hughes said. Hughes had several discussions with its advisors regarding “Bidder L’s” offer and decided it would “cause a more difficult and time-consuming approval process,” Hughes said.

Bidder L is believed to have been ViaSat, whose satellite-based broadband service WildBlue competes with HughesNet, analysts said. Given the regulatory concerns, Hughes’ board determined that Bidder L’s offer was “insufficient” and declined to give it an opportunity to conduct due diligence, Hughes said. The direct competitor entered a revised bid Jan. 24, but was again rebuffed by Hughes board, which said the proposed offer was lower than the potential winning bid. A Hughes spokeswoman and a ViaSat spokesman declined to comment. Hughes stock closed Tuesday up two cents at $59.76, just below the $60.73 proposed sale price and an increase from $46.43 on Jan. 19.

EchoStar’s proposal had the backing of Hughes advisor Barclays Capital as well as majority shareholder Apollo Management IV. The board approved EchoStar’s bid Feb. 13. Among the factors weighing on Hughes’ decision was that Apollo would eventually divest its holdings in a sale that would only relate to its stake in the company. A sale to EchoStar, which would cap a process that began in September, would benefit all shareholders, Hughes said.

The proposed sale carries a $15 million break-up fee, Hughes said. Barclays received a $1 million fee for delivering its opinion and will get another $15 million when sale is completed, Hughes said. Under Hughes’ change of control bonus program, Hughes executives would get $13 million within 10 days of the sale being completed, with CEO Pradman Kaul receiving $5.35 million and Executive Vice President Paul Gaske $2.4 million. Chief Financial Officer Grant Barber and Executive Vice Presidents Adrian Morris and Bahram Pourmand would get $1.9 million each.