Dish Network Corp. is proposing to buy EchoStar Corp., the satellite network operator it once owned, in an all-stock deal as billionaire Charlie Ergen works to shift his struggling legacy pay-TV business empire toward a future in wireless communications.
Every share of EchoStar will be converted into 2.85 shares of Dish, representing a premium of 12.9% for EchoStar stockholders, according to a company statement issued Tuesday. Existing Dish investors will own about 69% of the merged company. Dish was down 0.8% in pre-market trading. EchoStar shares were halted.
The merger reunites EchoStar with its former parent, which spun off the business in 2008. While EchoStar’s shares have risen more than 14% in the past 12 months, Dish shares have plunged 60% over the same period amid investor concerns about its debt levels and its reliance on a shrinking base of satellite TV subscribers.
Ergen, who is chairman of the board of both Dish and EchoStar, said the deal is “all about growth and building a long-term sustainable business.” Merging the companies’ operations will “significantly reduce” capital spending in the near term, he said.
Dish is trying to transform itself into a wireless data service provider and to position itself as a potential challenger to market leaders Verizon Communications Inc., T-Mobile US Inc. and AT&T Inc. The company announced in June that it met its mobile network buildout requirement and now covers more than 70% of the US population.
The same month, Dish launched Boost Infinite, its nationwide mobile subscription service, with a competitive $25 a month unlimited data plan. Ergen has told investors that Boost Infinite will prove its value in the market and help address the company’s financial situation.
Echostar Chief Executive Officer Hamid Akhavan will lead the combined company, and Ergen will serve as executive chairman, according to the statement. Erik Carlson, CEO of Dish, will step down when the transaction closes by the end of the year, another sign of Ergen’s desire to take the company in a different direction.
Dish has said it’s effectively cut off from the debt market and has a narrow window to address its capital structure. Credit analysts expect Dish will need as much as $16 billion in new capital between 2024 and 2026 to cover spending, wireless costs and address upcoming debt maturities.
EchoStar provides satellite services including secure communications technologies through its Hughes Network Systems and EchoStar Satellite Services businesses, its website shows. Hughes’s Jupiter 3, the world’s largest commercial communications satellite, was launched into orbit last month by SpaceX’s most powerful operational rocket and will provide wireless internet connectivity over North and South America.
(Updates with details of merger starting in second paragraph)