The marriage of
( GMH) is officially off.
The two direct broadcast satellite system operators said Tuesday morning that they have reached a settlement to terminate the deal, which had encountered ferocious opposition from the Federal Communications Commission and the Justice Department.
The announcement means that the two DBS operators will continue to function separately, and Hughes, which parent company
has been trying to unload for years, is free to once again be courted by suitors such as the previously spurned Rupert Murdoch and
More surprising than the deal's demise, which had been widely expected, is the companies' announcement that they have agreed on the payment EchoStar will have to make to Hughes as a breakup fee. Outsiders had expected the money at issue to be subject to months, if not years, of litigation.
Under the terms of Tuesday's breakup, EchoStar has paid to Hughes $600 million. The original agreement between the two companies mandated not only a fee of as much as $600 million if the merger didn't go through, but also EchoStar's purchase, valued at north of $3 billion, of Hughes' 81% ownership of satellite operator
. EchoStar, which told Wall Street last month that it believed it wasn't necessarily on the hook for both the full $600 million and the PanAmSat purchase, now won't be forced to acquire the satellite operator.
X Marks It
The biggest loser in the deal Tuesday appeared to be PanAmSat, whose shares dropped $3.51 to trade at $15.55. EchoStar's shares rose $1.16, to $20.21, while Hughes' shares dropped 24 cents, to $11.06.
EchoStar says it will take a writeoff of about $700 million in the fourth quarter to cover the breakup fee and other merger-related expenses.