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DirecTV-Pegasus Talks Collapse

Investors’ hopes of peace -- and a merger -- between DirecTV Inc. and Pegasus Communications Corp. fizzled.

Pegasus, which controls franchises to resell DirecTV in more than 80% of rural markets, has been suing the DBS giant over certain sales and program rights and has been hoping to use the suit as leverage in deal to sell the company. But talks collapsed during a meeting with Pegasus CEO Marshall Pagon and DirecTV Chairman Chase Carey.

"We believe that Pegasus has an unrealistic view of its contractual position and, therefore, of its resulting business prospects and fundamental valuation," Carey said in a statement. "With every day that passes, both Pegasus’ significance to DirecTV and its value as a standalone enterprise diminish."

Pegasus’s stock dropped 44% in after-hours trading listed on CBS Marketwatch.