An investor in shares of Hughes Communications filed a lawsuit in State Court against Hughes’s Board of Directors for alleges breaches of fiduciary duties arising out of their attempt to sell Hughes Communications to EchoStar Corp. via an unfair process at an unfair price.
On Monday, Feb 14, 2011, Hughes Communications, Inc. (NASDAQ: HUGH) and EchoStar Corporation (NASDAQ: SATS) had announced that they entered an agreement pursuant to which EchoStar Corp. will acquire all of the outstanding equity of Hughes Communications and its subsidiaries including its main operating subsidiary, Hughes Network Systems, LLC in a transaction valued at approximately $2 billion, including Hughes Communications debt expected to be refinanced in connection with the transaction. Under the terms of the transaction Hughes Communications' shareholders will receive $60.70 per share without interest. Hughes Communications, Inc said the offer represents a premium of 31% over Hughes' unaffected closing share price of $46.43 on January 19, 2011

But the plaintiff alleges the price is unfair. The offered price is a 4% discount to the most recent closing prices and a 1.7% discount to Hughes Communications’ trading price the day immediately preceding the announcement of the transaction. In fact shares of Hughes Communications Inc. (NASDAQ:HUGH) traded as recently as on January 13 at $63.83, as early as Thursday, Feb 10, as high as $62.71, and closed on Friday Feb 11at $61.78 per share. In addition at least one analyst has set a target price of $65 for the NASDAQ: HUGH shares. Furthermore Hughes Communications Inc. performed exceptionally well for its shareholders. Hughes Communications’ 12months Total Revenue went from $858.70million in 2006 to $1,009.70million in 2009. For the first three quarters in 2010 Hughes Communications Inc. reported a combined nine months Total Revenue of $761.84million.

Additionally the plaintiff alleges the process is unfair to HUGH investors. The plaintiff alleges that the board of directors breached their fiduciary duties by agreeing to the proposed transaction for grossly inadequate consideration, in order to allow majority shareholder Apollo Global Management LLC to liquidate its 57% stake in Hughes Communications at a massive profit. The defendants breached their fiduciary duty also, so the plaintiff, by agreeing to lock up the proposed transaction with deal protection devices, such as a strict no-solicitation, matching rights, and $45million termination fee provision, that preclude other bidders from making a successful competing offer for Hughes Communications.