Dish Network said on Tuesday it would merge with satellite operator EchoStar (SATS.O) to create a roughly $6 billion company by reuniting billionaire Charlie Ergen’s telecom empire to tackle growing competition from larger U.S. carriers.
Since spinning off EchoStar in 2008, Dish has looked to expand beyond satellite TV into streaming TV as well as mobile telecom services, but has faced stiff competition from bigger rivals, including AT&T (T.N) and Verizon Communications .
The all-stock deal will combine Dish’s pay-TV business and its 5G network with EchoStar’s satellite infrastructure that serves retail, business and government clients, which, Ergen said, will boost their cash flow and reduce near-term capex needs.
“The transaction is predominantly about Dish getting access to the $1.7 billion of cash at EchoStar,” New Street Research analyst Jonathan Chaplin said. “In addition to bolstering its liquidity, the combination will improve leverage for Dish.”
EchoStar stockholders will get 2.85 Dish Network’s Class A shares, with the exchange ratio representing a 12.9% premium to EchoStar’s close on July 5, a day before reports of the deal surfaced.
EchoStar’s shares, which have gained about 38% since July 5, fell 5% in early trading on Tuesday. Dish’s stock was up 4%.
Ergen, who co-founded Dish, owns more than half of its outstanding shares and owns nearly 60% of EchoStar. Dish had a market value of $4.07 billion as of Monday’s close, while EchoStar’s market value was $1.97 billion, according to Refinitiv data.
Ergen will serve as executive chairman and EchoStar CEO Hamid Akhavan will helm the combined company once the deal closes, which is expected by the end of the year.
Dish shareholders will own about 69% of the combined company and EchoStar shareholders the rest.
Separately, Dish and EchoStar also posted second-quarter revenue that edged past analysts’ average estimates, according to Refinitiv IBES data. Reuters