Buyout giant Kohlberg Kravis Roberts & Co. Tuesday won the three-month auction for PanAmSat Corp. ( SPOT) with an all-cash bid for the nation's third-largest satellite provider valued at $23.50 a share, or about $3.55 billion.

PanAmSat is 80.5% owned by DirecTV Group ( DTV), whose shares rose 4 cents, or 0.2%, to $17.52 on word of the deal. PanAmSat shares, however, fell $1.45, or 5.8%, to $23.34.

The deal includes the assumption of $750 million in debt, a factor that led ABN Amro analyst Patrick Fuhrmann to say a private equity investor was probably the right sort of buyer.

"Private equity guys could just bid higher," he said. "They have a low interest rate market. What we expect them to do is lever up the asset after taking it private, and that could hamper growth. They'll want to pay themselves a special dividend and then pay down any debt to the point where it's attractive to re-IPO it."

The transaction is expected to get final approval in the second half of the year, according to PanAmSat.

Fuhrmann likened the KKR deal to the $485 million February purchase of satellite television, radio, and communications company Eutelsat by French private equity firm Eurazeo, which bought a 23.14% stake from France Telecom's. He said Eutelsat was a principal rival of KKR in the bidding process.

A spokeswoman for KKR declined to comment, citing the private equity firm's recent public offering of KKR BDC.

PanAmSat broadcasts about 2,100 channels worldwide over a network of 24 satellites.

The sale of PanAmSat and planned unloading of satellite data network specialist Hughes Network Systems are expected to fill DirecTV's coffers as it plans an aggressive expansion program to compete against cable television systems and other satellite programming providers.

Telecommunications investments battered several large buyout firms after the collapse of the technology stock sector in 2000. Welsh, Carson, Anderson & Stowe and Forstmann Little & Co. lost hundreds of millions of dollars on high profile telecom investments.