EchoStar nears deal to sell Dish to DirecTV as debt repayment looms: sources

Charlie Ergen is close to selling the pay-TV company he founded more than 40 years ago.

Ecostar It is currently in advanced talks to sell satellite TV provider Dish Network to rival DirecTV, the pay-TV operator owned by private equity firm TPG and AT&T, According to people familiar with the matter. While both sides hope to complete an agreement by Monday, an agreement has not been guaranteed, and the talks could collapse, said the sources, who requested anonymity because the discussions are private.

A combination of Dish and DirecTV has been rumored for years and almost happened in 2002 until then It collapsed under regulatory pressure. This time, the deal was prompted by EchoStar’s desire to pay off $1.98 billion in debt due in November, two people familiar with the process said. EchoStar had just $521 million of cash, equivalents and marketable investment securities as of June 30, and expects negative cash flows for the remainder of 2024, according to public filings.

The possibility of EchoStar going bankrupt in the future and approval of the deal by creditors makes completing the deal complicated. Dish tried to refinance some of its debt earlier this week with bondholders, but negotiations failed, according to A. September 23 filing.

The company said in public filings that it is still in discussions with other debtors.

The potential DirecTV-Dish deal is structured as an all-cash deal, with DirecTV paying EchoStar for its satellite TV business, its Sling digital business and related liabilities, people familiar with the matter said.. Overall, the deal could be worth more than $9 billion, according to one of the people.

A DirecTV spokesman declined to comment. A Dish spokesperson could not immediately be reached for comment.

“The bottom line is that we now see bankruptcy in the next four to six months as the most likely outcome [for EchoStar]“They will need to raise new capital,” Craig Moffitt of MoffettNathanson said in a note to clients in August.

EchoStar has a total enterprise value of about $31 billion and a market cap of about $7.6 billion. There is no wireless spectrum involved in the proposed deal, which Dish Network has spent the past decade amassing in its quest to transform into a wireless company, the people said.

Satellite channels, which were among the largest distributors of package television, They’ve been declining for years — often at a faster rate than cable competitors – As consumers shift to subscription streaming services such as netflix, Disney+ and Amazon Prime Video. Dish ended the fourth quarter with 6.1 million satellite subscribers and 2 million customers for Sling TV, Dish’s online linear networking package.

DirecTV has also felt the pain, having lost millions of subscribers since AT&T bought the company in 2015 for $67 billion in debt. AT&T spun it out in 2021 and sold part of the company to TPG. At the time, DirecTV had approximately 15.4 million subscribers. Today, they number about 11 million, CNBC previously reported.

The company has recently been focusing on building its streaming business, with its latest ad campaign centered around dispelling the belief that DirecTV is only available through a satellite dish. MoffettNathanson estimates DirecTV added more than 20,000 streaming customers earlier this year. The bulk of its customers still use satellite dishes.

Recently, DirecTV has been in a distribution battle with Disney, which saw networks including ESPN cut out for about two weeks for the satellite TV company’s customers. The two companies have reached an agreement that gives DirecTV the ability to offer slimmer, genre-specific packages.

— CNBC’s Lillian Rizzo contributed to this report.