Saturday, June 02, 2012

(BN) Verizon Buys Hughes Telematics for $612 Million in Cash

Verizon Buys Hughes Telematics for $612 Million in Cash

Verizon Communications Inc. (VZ) agreed to buy Hughes Telematics Inc. (HUTC) for $612 million in cash, vaulting the telephone company deeper into the automotive-technology market.

Verizon will pay $12 a share in the acquisition, which is expected to close in the third quarter, the New York-based company said in a statement today.

Hughes, based in Atlanta, sells products that offer GPS tracking, communications and safety features in cars. The deal gives Verizon a new source of growth as it faces saturation in the U.S. market for mobile phones and land lines. Verizon is competing with carriers like AT&T Inc. (T) and other companies such as Apple Inc. (AAPL), which sells both devices and services.

"Connected devices are expected to be another leg of growth," Walter Piecyk, a New York-based analyst with BTIG LLC, said in a telephone interview. Verizon is betting that the more they can operate in your car "the better they can integrate with what's in your hand or at home," he said.

Hughes offers voice and data connections to vehicles that are monitored through call centers, according to company filings. The system provides emergency services, location-based features and vehicle diagnostics.

"Apple isn't the only company trying to build an ecosystem," Piecyk said.

The deal represents a premium of 176 percent over Hughes's trading price yesterday of $4.35 a share. Verizon will receive a $21.4 million breakup fee from Hughes if the deal fails, according to a filing today.

Hughes shares rose almost threefold to close at $11.79 in New York. Verizon fell 1.5 percent to $41.03. The carrier's shares had risen 3.8 percent this year before today.

UBS AG (UBSN) and Debevoise & Plimpton LLP advised Verizon on the deal. Hughes was represented by Barclays Plc (BARC) and Skadden, Arps, Slate, Meagher & Flom LLP.

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