Billionaire Charlie Ergen’s decision to combine his two telecom companies, pay-TV provider Dish Network Corp. and satellite-communications company EchoStar Corp. in an all-stock deal sent their shares higher on Tuesday.
The news also sparked a rally in the company’s bonds.
The companies earlier confirmed a report by the Wall Street Journal late Monday that they would merge. Upon closing, EchoStar shareholders will receive 2.85 Dish shares DISH, +9.75% for each share of EchoStar Corporation SATS, +1.49% Class A, Class C or Class D common stock and 2.85 shares of DISH Network Class B common stock for each share of EchoStar Corporation Class B common stock they own.
The exchange ratio is equal to a premium of 12.9% over the unaffected 30-day volume weighted average closing stock prices of the two companies on July 5, the last full trading day before media speculation regarding a potential transaction.
“The transaction combines DISH Network’s satellite technology, streaming services and nationwide 5G network with EchoStar’s premier satellite communications solutions, creating a global leader in terrestrial and non-terrestrial wireless connectivity,” the companies said in a joint statement.
It’s expected to generate significant cost and revenue synergies and enhance free cash flow. “This is a strategically and financially compelling combination that is all about growth and building a long-term sustainable business,” said Ergen.
The deal is expected to close by year-end.
Dish’ stock was last up 8% on Tuesday. As the following chart from data-as-a-service company BondCliQ Media Services shows, there was mostly net selling on Tuesday into the rally.
Dish Network Corp. net customer flows (intraday). Source: BondCliQ Media Services
The bonds had seen better net selling over the last 10 days too, according to BondCliQ.
Most active Dish Network Corp. issues with net customer flow (last 10 days). Source: BondCliQ Media Services