Vivendi Buys Ten Percent of EchoStar

Media giant, Vivendi Universal announced its latest deal—the company will pay $1.5 billion for a 10 percent stake in EchoStar Communications Corp. This move strengthens Vivendi's plan to acquire a U.S. distribution channel for its content. This investment will score the company the amount necessary to finance its merger with Hughes Electronics, which has been said to need an extra $26 billion in financing.

As part of the agreement, the media content plans to offer EchoStar's DISH Network customers five new channels of programming content including action, suspense, music, youth-oriented channels, and interactive game channels. Vivendi will also offer expanded pay-per-view and video-on-demand movies from current Vivendi Universal films, as well as certain library films and events. These services are expected to begin in the fall of 2002, and will complement EchoStar's current lineup of entertainment, family, news, and sports channels. Customary fees per subscriber will be paid by EchoStar to Vivendi Universal once the channels become available.

Both companies will also work together on a new programming initiative to develop new satellite-delivered broadband channels featuring interactive games, movies, sports, education, and music to be launched within a three-year period following the consummation of the agreement. EchoStar will integrate Vivendi Universal's MediaHighway as a non-exclusive middleware solution that will provide DISH Network customers using personal video recorders interactive TV services, such as movies from Vivendi Universal and music from Universal Music Group.

Under the agreement, EchoStar will issue Series D Preferred Stock, at an issue price of approximately $26.04 per share, in exchange for a $1.5 billion equity investment by Vivendi. At completion of Vivendi's merger with Hughes, the Series D Preferred Stock will convert into shares of EchoStar Class A Common Stock, exchangeable for shares of the Class A Common Stock of the combined EchoStar/Hughes in the merger. At completion of this transaction, Vivendi will own approximately ten percent of EchoStar. Vivendi's equity investment is expected to be completed in the first quarter of 2002.

Vivendi also announced that Jean-Marie Messier would become a member of EchoStar's Board of Directors when the investment occurs, and he will continue as a director following the pending merger of EchoStar and Hughes Electronics.