<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 18, 1999
Date of Earliest Event Reported: June 4, 1999
TCI SATELLITE ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
000-21317 84-1299995
(Commission File Number) (I.R.S. Employer Identification No.)
8085 South Chester, Suite 300
Englewood, Colorado 80112
(Address of principal executive offices,
including zip code)
Registrant's telephone number, including area code: (303) 712-4600
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Item 2. Disposition of Assets.
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Effective June 4, 1999, the Registrant completed the sale of its high power
direct broadcast satellite ("DBS") assets to Hughes Electronics Corporation
("Hughes"), pursuant to an asset purchase agreement dated as of January 22, 1999
(the "Hughes High Power Agreement"), among Tempo Satellite, Inc., a wholly-owned
subsidiary of the Registrant ("Tempo"), Phoenixstar, Inc., a Delaware
corporation formerly known as PRIMESTAR, Inc. ("P-star"), Phoenixstar Partners
L.P., a Delaware limited partnership and wholly-owned subsidiary of P-star
formerly known as PRIMESTAR Partners L.P. ("PLP"), and Hughes, an unaffiliated
third party. The assets transferred by the Registrant pursuant to the Hughes
High Power Agreement consist of Tempo's two high-power DBS satellites, one of
which was in orbit at 119 degrees West Longitude (the "In-Orbit Satellite") and
one of which was used as a ground spare (the "Ground Satellite"), its FCC
authorizations with respect to the 119 degrees West Longitude orbital location
(the "FCC License"), and certain related assets (collectively, the "Tempo High
Power Assets").
The Registrant had previously granted P-star the right and option (the
"Tempo Purchase Option") to purchase 100% of the Tempo High Power Assets for
aggregate consideration of $2.5 million in cash and the assumption of all
liabilities. The Tempo Purchase Option was approved by the stockholders of the
Registrant at a special meeting of such stockholders on March 6, 1998. In
addition, Tempo had previously granted to PLP the right to purchase or lease
100% of the capacity of the DBS system being constructed by Tempo (the "Tempo
Capacity Rights), and PLP had made advances to Tempo to fund the construction of
Tempo's DBS system in the aggregate amount of $465 million (the "Tempo
Reimbursement Obligation").
Accordingly, the Hughes High Power Agreement provided for (i) the sale by
P-star to Hughes of the Tempo Purchase Option, (ii) the exercise of the Tempo
Purchase Option by Hughes, and (iii) the termination of the Tempo Capacity
Rights (collectively, the "Hughes High Power Transaction"). The aggregate
consideration payable by Hughes in the Hughes High Power Transaction was $500
million, payable as described below.
As regulatory approval was required to transfer the In-Orbit Satellite and
the FCC License, the Hughes High Power Agreement provided for the Hughes High
Power Transaction to be completed in two steps. To facilitate the transaction,
the Tempo Purchase Option was amended to provide for a two-stage exercise
process. The parties allocated 70% of the total consideration under the Hughes
High Power Agreement to the In-Orbit Satellite and related assets and 30% of the
total consideration thereunder to the Ground Satellite and related assets.
The first closing under the Hughes High Power Agreement was consummated
effective March 10, 1999. In the first closing, Hughes acquired the Ground
Satellite and related assets for aggregate consideration of $150 million,
payable as follows:
(1) Hughes paid an aggregate of $9,750,000 to P-star and PLP for the
transfer to Hughes of that portion of the Tempo Purchase Option allocable
to the Ground Satellite and the termination of that portion of the Tempo
Capacity Rights allocable to the Ground Satellite;
1
<PAGE>
(2) Hughes paid Tempo $750,000 to exercise that portion of the Tempo
Purchase Option allocable to the Ground Satellite; and
(3) Hughes assumed and immediately satisfied a portion of the Tempo
Reimbursement Obligation in the amount of $139,500,000.
At the time of the first closing, the carrying value of the Ground
Satellite was $224 million. In addition, as required by the Hughes High Power
Agreement, the Registrant and P-star agreed to terminate the previously
announced merger of the Registrant with and into P-star, effective as of such
first closing.
The FCC approved the transfer of the FCC License to Hughes on May 28, 1999,
and the second closing under the Hughes High Power Agreement was consummated
effective June 4, 1999. In the second closing, Hughes acquired the In-Orbit
Satellite and related assets, including all rights of Tempo with respect to the
FCC License, for aggregate consideration for $350 million, payable as follows:
(1) Hughes paid an aggregate of $22,750,000 to P-star and PLP for the
transfer to Hughes of that portion of the Tempo Purchase Option allocable
to the In-Orbit Satellite and the termination of that portion of the Tempo
Capacity Rights allocable to the In-Orbit Satellite;
(2) Hughes paid Tempo $1,750,000 to exercise that portion of the Tempo
Purchase Option allocable to the In-Orbit Satellite; and
(3) Hughes assumed and immediately satisfied the remainder of the
Tempo Reimbursement Obligation, in the amount of $325,500,000.
The carrying value of the In-Orbit Satellite was approximately $239 million
at the time of the second closing. In addition, P-star agreed to forgive amounts
due from Tempo not assumed by Hughes in the amount of $9,346,000.
Item 7. Financial Statements and Exhibits.
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(b) Pro forma financial information
TCI Satellite Entertainment, Inc. Condensed Pro Forma Combined Balance
Sheet - March 31, 1999. The Registrant's pro forma results of operations would
not be impacted by the consummation of the second closing under the Hughes High
Power Agreement because the sale of the In-Orbit Satellite is a nonrecurring
transaction. Accordingly, a detailed pro forma statement of operations is not
included herein.
(c) Exhibits
10.1 Hughes High Power Agreement, incorporated by reference to Exhibit 99.2
of the Company's Current Report on Form 8-K, dated February 1, 1999.
99.1 Press Release, dated June 7, 1999, filed herewith.
2
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: June 18, 1999
TCI SATELLITE ENTERTAINMENT, INC.
By:/s/ Kenneth G. Carroll
---------------------------
Kenneth G. Carroll
Senior Vice President and
Chief Financial Officer
3
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
March 31, 1999
(unaudited)
Effective June 4, 1999, the Registrant completed the sale of its high power
direct broadcast satellite ("DBS") assets to Hughes Electronics Corporation
("Hughes"), pursuant to an asset purchase agreement dated as of January 22, 1999
(the "Hughes High Power Agreement"), among Tempo Satellite, Inc., a wholly-owned
subsidiary of the Company ("Tempo"), Phoenixstar, Inc., a Delaware corporation
formerly known as PRIMESTAR, Inc. ("P-star"), Phoenixstar Partners L.P., a
Delaware limited partnership and wholly-owned subsidiary of P-star formerly
known as PRIMESTAR Partners L.P. ("PLP"), and Hughes, an unaffiliated third
party. The assets transferred by the Company pursuant to the Hughes High Power
Agreement consist of Tempo's two high-power DBS satellites, one of which was in
orbit at 119 degrees West Longitude (the "In-Orbit Satellite") and one of which
was used as a ground spare (the "Ground Satellite"), its FCC authorizations with
respect to the 119 degrees West Longitude orbital location (the "FCC License"),
and certain related assets (collectively, the "Tempo High Power Assets").
The Company had previously granted P-star the right and option (the "Tempo
Purchase Option") to purchase 100% of the Tempo High Power Assets for aggregate
consideration of $2.5 million in cash and the assumption of all liabilities. The
Tempo Purchase Option was approved by the stockholders of the Company at a
special meeting of such stockholders on March 6, 1998. In addition, Tempo had
previously granted to PLP the right to purchase or lease 100% of the capacity of
the DBS system being constructed by Tempo (the "Tempo Capacity Rights), and PLP
had made advances to Tempo to fund the construction of Tempo's DBS system in the
aggregate amount of $465 million (the "Tempo Reimbursement Obligation").
Accordingly, the Hughes High Power Agreement provided for (i) the sale by
P-star to Hughes of the Tempo Purchase Option, (ii) the exercise of the Tempo
Purchase Option by Hughes, and (iii) the termination of the Tempo Capacity
Rights (collectively, the "Hughes High Power Transaction"). The aggregate
consideration payable by Hughes in the Hughes High Power Transaction was $500
million, payable as described below.
As regulatory approval was required to transfer the In-Orbit Satellite and
the FCC License, the Hughes High Power Agreement provided for the Hughes High
Power Transaction to be completed in two steps. To facilitate the transaction,
the Tempo Purchase Option was amended to provide for a two-stage exercise
process. The parties allocated 70% of the total consideration under the Hughes
High Power Agreement to the In-Orbit Satellite and related assets and 30% of the
total consideration thereunder to the Ground Satellite and related assets.
The first closing under the Hughes High Power Agreement was consummated
effective March 10, 1999. In the first closing, Hughes acquired the Ground
Satellite and related assets for aggregate consideration of $150 million,
payable as follows:
<PAGE>
(1) Hughes paid an aggregate of $9,750,000 to P-star and PLP for the
transfer to Hughes of that portion of the Tempo Purchase Option allocable
to the Ground Satellite and the termination of that portion of the Tempo
Capacity Rights allocable to the Ground Satellite;
(2) Hughes paid Tempo $750,000 to exercise that portion of the Tempo
Purchase Option allocable to the Ground Satellite; and
(3) Hughes assumed and immediately satisfied a portion of the Tempo
Reimbursement Obligation in the amount of $139,500,000.
At the time of the first closing, the carrying value of the Ground
Satellite was $224 million. In addition, as required by the Hughes High Power
Agreement, the Company and P-star agreed to terminate the previously announced
merger of the Company with and into P-star, effective as of such first closing.
The FCC approved the transfer of the FCC License to Hughes on May 28, 1999,
and the second closing under the Hughes High Power Agreement was consummated
effective June 4, 1999. In the second closing, Hughes acquired the In-Orbit
Satellite and related assets, including all rights of Tempo with respect to the
FCC License, for aggregate consideration for $350 million, payable as follows:
(1) Hughes paid an aggregate of $22,750,000 to P-star and PLP for the
transfer to Hughes of that portion of the Tempo Purchase Option allocable
to the In-Orbit Satellite and the termination of that portion of the Tempo
Capacity Rights allocable to the In-Orbit Satellite;
(2) Hughes paid Tempo $1,750,000 to exercise that portion of the Tempo
Purchase Option allocable to the In-Orbit Satellite; and
(3) Hughes assumed and immediately satisfied the remainder of the
Tempo Reimbursement Obligation, in the amount of $325,500,000.
The carrying value of the In-Orbit Satellite was approximately $239 million
at the time of the second closing. In addition, P-star agreed to forgive amounts
due from Tempo not assumed by Hughes in the amount of $9,346,000.
In a separate transaction consummated on April 28, 1999 (the "Hughes Medium
Power Closing Date") pursuant to an asset purchase agreement dated January 22,
1999 (the "Hughes Medium Power Agreement"), P-star sold its medium-power direct
broadcast satellite business to Hughes for aggregate consideration of $1,358.2
million (the "Hughes Medium Power Transaction"). Such consideration was
comprised of $1,100 million in cash (before working capital adjustments and
closing costs) and 4.871 million shares of General Motors Class H common stock
("GMH Stock") valued at $258.2 million on the Hughes Medium Power Closing Date.
<PAGE>
In connection with their approval of the Hughes Medium Power Transaction,
the stockholders of P-star any also approved the payment to TSAT of
consideration in the form of 1.407 million shares of GMH Stock (the "Phoenixstar
Payment"), subject to the terms and conditions set forth in an agreement dated
as of January 22, 1999. In consideration of the Phoenixstar Payment, TSAT agreed
to, among other matters, issue to P-star a share appreciation right (the "TSAT
GMH SAR") with respect to the shares of GMH Stock received as the Phoenixstar
Payment, granting P-star the right to any appreciation in such GMH Stock over
the one-year period following the date of issuance over an agreed strike price
of $47.00. On the Hughes Medium Power Closing Date, P-star delivered to TSAT
1.407 million shares of GMH Stock in satisfaction of the Phoenixstar Payment.
The following unaudited condensed pro forma combined balance sheet of the
Company, dated as of March 31, 1999, assumes that the Hughes High Power and
Medium Power Transactions had occurred as of such date. The unaudited pro forma
results do not purport to be indicative of the results of operations that would
have been obtained if the Hughes High Power and Medium Power Transactions had
occurred as of March 31, 1999.
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
March 31, 1999
(unaudited)
<TABLE>
<CAPTION>
TSAT Pro forma TSAT
historical adjustments pro forma
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Assets
- ------
Cash and cash equivalents $ 752 1,750 (1) 2,502
Investment in GMH Stock -- 74,587 (2) 74,587
Satellites 239,118 (239,118) (1) --
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$ 239,870 (162,781) 77,089
========= ======== ========
Liabilities and Stockholders' Equity (Deficit)
- ----------------------------------------------
TSAT GMH SAR liability -- 8,444 (2) 8,444
Due to Phoenixstar, Inc. 332,818 (332,818) (1) --
--------- -------- --------
Total liabilities 332,818 (324,374) 8,444
--------- -------- --------
Stockholders' Equity (Deficit):
Common stock 67,820 -- 67,820
Additional paid-in capital 825,382 -- 825,382
Accumulated deficit (986,150) 95,450 (1) (824,557)
66,143 (2)
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Total stockholders' equity (deficit): (92,948) 161,593 68,645
--------- -------- --------
$ 239,870 (162,781) 77,089
========= ======== ========
</TABLE>
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Balance Sheet
March 31, 1999
(unaudited)
(1) Represents the sale of the Company's In-Orbit Satellite and FCC License to
Hughes for aggregate consideration of $334,568,000, comprised of $1,750,000
in cash, the assumption and repayment by Hughes of $325,500,000 due to
Phoenixstar and the forgiveness of amounts due to Phoenixstar in the amount
of $7,318,000.
(2) Represents the receipt of 1.407 million shares of GMH Stock (valued at $53
per share) from Phoenixstar and the recognition of the amount due to
Phoenixstar pursuant to the TSAT GMH SAR calculated as follows:
<TABLE>
<S> <C>
Fair value of GMH Stock on April 28, 1999 $ 53
TSAT GMH SAR exercise price (47)
------------
Difference 6
Number of shares of GMH Stock subject to TSAT
GMH SAR x 1,407,307
------------
TSAT GMH SAR liability $ 8,443,842
============
</TABLE>
<PAGE>
Exhibit Index
-------------
10.1 Hughes High Power Agreement, incorporated by reference to Exhibit 99.2 of
the Company's Current Report on Form 8-K, dated February 1, 1999.
99.1 Press Release, dated June 7, 1999, filed herewith.
<PAGE>
[LOGO APPEARS HERE]
PHOENIXSTAR, INC.
FOR IMMEDIATE RELEASE Contact:
--------
Phoenixstar, Inc. Investor Relations
Sean Clarke: (303) 712-4647
TCI SATELLITE ENTERTAINMENT, INC. AND PHOENIXSTAR, INC.
ANNOUNCE IN-ORBIT SATELLITE CLOSING
ENGLEWOOD, CO, June 7, 1999 - TCI Satellite Entertainment, Inc. ("TSAT")
and Phoenixstar, Inc., formerly known as PRIMESTAR, Inc. ("Phoenixstar"),
announced today the consummation of the sale of the high-power satellite, which
is currently in orbit at 119 degrees West Longitude (the "In-Orbit Satellite"),
of Tempo Satellite, Inc. ("Tempo"), a wholly owned subsidiary of TSAT, to Hughes
Electronics Corporation ("Hughes"), pursuant to an asset purchase agreement (the
"Hughes High Power Agreement"), dated as of January 22, 1999, among Phoenixstar,
Phoenixstar Partners L.P., a wholly owned subsidiary of Phoenixstar that was
formerly known as PRIMESTAR Partners L.P. ("PLP"), Tempo, Hughes and certain
stockholders (or affiliates of such stockholders) of Phoenixstar. Also pursuant
to the Hughes High Power Agreement, Tempo transferred to Hughes its FCC
authorizations with respect to the 119 degrees West Longitude orbital location
(the "FCC License").
In April 1998, in connection with a restructuring of Phoenixstar, TSAT
granted to Phoenixstar a transferable option (the "TSAT Tempo Option") which
permitted Phoenixstar to purchase all of the assets of Tempo, which included (i)
the In-Orbit Satellite and (ii) another satellite, that was used as a ground
spare (the "Ground Satellite"). In addition, Tempo had borrowed funds (the
"Reimbursement Obligation") from PLP in order to construct and maintain the
satellites. Tempo also had granted to PLP the right to lease capacity (the
"Capacity Option") on the satellites. On March 10, 1999, pursuant to the Hughes
High Power Agreement, Hughes acquired the Ground Satellite (and related assets)
for aggregate consideration of $150 million, which was comprised of the
following: (1) $9,750,000 paid to Phoenixstar and PLP for (a) Phoenixstar's
assignment of that portion of the TSAT Tempo Option applicable to the Ground
Satellite to Hughes and (b) PLP's partial termination and waiver of the Capacity
Option as it applied to the Ground Satellite, (2) $750,000 paid to TSAT upon
Hughes' exercise of the TSAT Tempo Option applicable to the Ground Satellite and
(3) the assumption and payment by Hughes of a portion of the Reimbursement
Obligation applicable to the Ground Satellite in the amount of $139,500,000.
-more-
<PAGE>
In-orbit Satellite Closing, page 2
Regulatory approval from the FCC was required to transfer the FCC License
to Hughes; the FCC approved such transfer on May 28, 1999.
The aggregate consideration for the sale of the In-Orbit Satellite (and
related assets) was $350 million, which was comprised of the following: (1)
$22,750,000 paid to Phoenixstar and PLP for (a) Phoenixstar's assignment of that
portion of the TSAT Tempo Option applicable to the In-Orbit Satellite to Hughes
and (b) PLP's partial termination and waiver of the Capacity Option as it
applied to the In-Orbit Satellite, (2) $1,750,000 paid to TSAT upon Hughes'
exercise of the TSAT Tempo Option applicable to the In-Orbit Satellite and (3)
the assumption and payment by Hughes of a portion of the Reimbursement
Obligation applicable to the In-Orbit Satellite in the amount of $325,500,000.
Phoenixstar and PLP intend to use the proceeds received from Hughes to
repay a portion of their indebtedness.
###
