Dish Network and satellite communications firm EchoStar, two companies controlled by Executive Chairman Charles Ergen, said Tuesday they will merge in a move designed to help Dish finance the build-out of a 5G wireless network. DISH stock surged while SATS stock gained on the announcement.
Under the deal, 2.85 shares of DISH stock will be exchanged for each share of SATS stock. That represents a 12.9% premium for EchoStar shareholders as of the July 5 trading close.
Dish needs to raise capital to continue building out its 5G wireless network. Further, EchoStar churns out ample free cash flow, which will enable Dish to add debt.
DISH stock jumped 9.6% to close at 8.37 on the stock market today. SATS stock erased losses and gained 1% to close at 23.74.
DISH Stock Down, SATS Stock Up For 2023
SATS stock has gained since July 5 amid speculation over a merger. As of Monday's market close, SATS stock had climbed 41% in 2023. DISH stock had plunged 46%.
Ergen spun out EchoStar from Dish in 2008.
Meanwhile, Dish acquired Sprint's Boost-branded prepaid wireless business in 2020. But Dish has been losing satellite video subscribers. There's also speculation Dish could merge with privately held DirecTV, currently the biggest satellite TV company in the U.S.
Also, second-quarter earnings for DISH stock came in early Tuesday. The company reported earnings per share of 31 cents, topping estimates of 30 cents. Revenue was $3.91 billion, meeting expectations.
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