Dish Network and EchoStar, two companies founded by billionaire Charlie Ergen, announced on Tuesday that they have agreed to merge in an all-stock deal. The merger will combine Dish’s satellite TV, streaming, and wireless businesses with EchoStar’s satellite communications and broadband services.
The Rationale Behind the Merger
The merger is a strategic move by Ergen to consolidate his telecom empire and diversify his revenue streams. Dish has been struggling with the decline of its satellite TV business, which has been losing subscribers to cord-cutting and competition from streaming services. Dish has also been investing heavily in building its own 5G wireless network, which covers more than 70% of the U.S. population.
EchoStar, on the other hand, has been focusing on its satellite communications and broadband businesses, which serve customers in over 100 countries. EchoStar recently launched its most powerful satellite yet, JUPITER 3, which has significant capacity for converged terrestrial and non-terrestrial services.
By merging the two companies, Ergen hopes to create a more efficient and competitive telecom giant that can leverage its combined assets, capabilities, and customer base. The merger is expected to generate cost and revenue synergies, as well as enhance the free cash flow generation and capital structure of the combined company.
The Terms of the Deal
The deal values EchoStar at about $2.4 billion, based on Dish’s closing price on Monday. Under the terms of the deal, EchoStar shareholders will receive 2.85 shares of Dish common stock for each share of EchoStar they own. This represents a premium of 12.9% to EchoStar’s closing price on July 5, the last full trading day before media speculation about the deal emerged.
The deal will result in Dish shareholders owning about 69% of the combined company, while EchoStar shareholders will own about 31%. The deal is expected to close by the end of the year, subject to regulatory approvals and customary closing conditions.
The combined company will be headquartered in Englewood, Colorado, and will operate under the name Dish Network Corporation. Hamid Akhavan, the current CEO of EchoStar, will become the CEO of the combined company. Erik Carlson, the current CEO of Dish, will leave the company upon closing of the deal. Ergen will remain as the executive chairman of the board.
The Reaction from the Market
The market reacted positively to the news of the merger, as both Dish and EchoStar shares rose on Tuesday. Dish shares closed up 4.5% at $6.97 per share, while EchoStar shares closed up 5.6% at $18.12 per share.
Analysts also praised the deal, saying that it makes strategic and financial sense for both companies. Craig Moffett, an analyst at MoffettNathanson, said that the deal “is a logical step in Charlie Ergen’s long-term vision for his telecom empire.” He added that “the combination of Dish’s wireless spectrum and EchoStar’s satellite capacity creates a powerful platform for delivering converged services.”
