Predicting AT&T Acquisition, Oppenheimer Upgrades Dish
Eagan Says EchoStar is Ripe for Merger, Following Acquisition of Sling Media
By Steve Donohue -- Multichannel News, 9/27/2007 4:48:00 AM
Oppenheimer & Co. analyst Tom Eagan upgraded EchoStar from a neutral to buy rating Thursday, following Dish Network’s plans to acquire Sling Media and word that EchoStar plans to spin off its technology assets into a separate company.
Eagan also suggested that EchoStar is primed for a merger with AT&T, citing the “lack of success” of AT&T’s U-verse TV product.
“Given the success of the cable triple play and the lack of success of AT&T’s U-verse rollout, it seems to us a matter of when, not if, AT&T acquires EchoStar,” Eagan wrote in a research note.
EchoStar, which was trading at $46.88 per share early Thursday afternoon, could score more than $56 per share from AT&T, according to Oppenheimer.
“Although [EchoStar CEO Charlie] Ergen could run and control DISH for the next 20 years, we don’t believe that’s his strategy. Rather, as the consummate poker player, he is more likely to sell at the opportune time,” Eagan added. “With DISH fundamentals strong and [AT&T’s] U-verse expansion faltering, we believe that time is approaching.”
Oppenheimer estimates that the “takeout” price of EchoStar for AT&T would “likely be north of $56 per DISH share.” That would value EchoStar at 8.6 times 2008 operating cash flow, similar to the price Cablevision’s founding Dolan family bid to take the cable TV operator private.
“At that price, however, DISH would have an enterprise value of $1,935 per sub, only 35% of the $5,500 [Cablevision] take out [price] per sub,” Eagan added.
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