EchoStar sale a matter of 'when'

Buzz about acquisition by AT&T sends shares up 8%

NEW YORK -- Shares of EchoStar Communications jumped more than 8% in intraday trading Thursday as Wall Street buzz returned about a possible acquisition of the satellite TV giant by AT&T.

EchoStar shares were up 6% to $45.98, giving the firm a market capitalization of about $20.6 billion. They have traded between $31.73 and $49.69 during the past year.

Oppenheimer & Co. analyst Thomas Eagan on Thursday upgraded his rating on EchoStar shares from "neutral" to "buy," arguing that "recent events add $4-$6 per share to our valuation." He was referring to this week's announcements of a planned acquisition of hot technology player Sling Media and a possible separation of EchoStar into two stocks.

Eagan added that he sees the news that the company is mulling "the uncoupling of the EchoStar divisions into two stocks as a step towards a sale of the Dish Network."

Said Eagan: "Given the success of the cable triple-play (bundle) and the lack of success of AT&T's U-Verse (video service) rollout, it seems to us a matter of when, not if, AT&T acquires EchoStar."

If a buyout multiple was comparable with the planned buyout of Cablevision Systems by the controlling Dolan family, the acquisition price tag for EchoStar could be about $56 per share, according to Eagan.

An EchoStar spokeswoman declined comment on the renewed deal talk. AT&T officials couldn't be reached.

Wall Street observers in recent years repeatedly have suggested that EchoStar founder, chairman and CEO Charles Ergen could simply run his company forever rather than sell it.

"Although Mr. Ergen could run and control EchoStar for the next 20 years, we don't believe that's his strategy," Eagan said. "Rather, as the consummate poker player, he is more likely to sell at the opportune time. With EchoStar fundamentals strong and AT&T's U-Verse expansion faltering, we believe that time is approaching."
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