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Charlie Ergen, the 70-year-old billionaire, unveiled an all-stock deal on Tuesday to reunite Dish Network, a .5 billion pay-TV operator, with the smaller EchoStar infrastructure business. This move comes 15 years after Ergen initially separated his satellite empire.

The 2008 spinoff did not deliver on Ergen’s promise to “unlock additional value.” Dish has experienced a 73% total shareholder loss since the split, while EchoStar generated only a 27% return. In comparison, the Nasdaq Composite Index returned more than 500% over the same period.

Ergen’s thrifty nature means that there will be limited cost savings from merging the two companies he chairs. The merger is expected to reduce costs by approximately million per year, which is less than 1% of their combined operating expenses and capital expenditures.

The primary objective of the deal is to get EchoStar’s .9 billion in cash onto Dish’s strained balance sheet. Dish aims to make better use of its significant portfolio of wireless spectrum.

Under the deal, Dish shareholders will own 69% of the newly enlarged entity. While the merger is not particularly compelling, aside from a modest 13% premium for EchoStar shareholders, it does buy some valuable time.

Additional Information:

Despite the limited potential for significant cost savings, the merger between Dish Network and EchoStar could benefit both companies. By bringing EchoStar’s infrastructure business back under the control of Dish Network, it allows Dish to streamline its operations and make better use of its wireless spectrum. Dish has been facing challenges in deploying its spectrum efficiently, and this merger could help address those issues.

Additionally, the reunion of Dish Network and EchoStar may provide an opportunity for both companies to leverage their respective strengths and pursue new growth strategies. The combined entity will have a stronger position in the pay-TV market, potentially allowing for increased competitiveness and improved profitability.

However, it remains to be seen how successful this merger will be in creating long-term value for shareholders. The pay-TV industry is undergoing significant disruption, with the rise of streaming services and cord-cutting trends. Dish Network will need to innovate and adapt to these changes to remain relevant in the evolving media landscape.

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