Dish Network Corp. Chairman Charlie Ergen recently contacted DirecTV Chief Executive Officer Mike White to discuss a merger of the two satellite television companies, according to several people with knowledge of the matter. Shares of both companies rose.
Ergen made the approach in response to Comcast Corp.’s $45 billion acquisition of Time Warner Cable Inc. in mid-February, one of the people said, asking not to be identified discussing confidential information. White is reluctant to push forward with formal talks out of concern regulators may block the deal because the two companies directly compete with each other, another person said.
Even if regulators allow Comcast’s acquisition of Time Warner Cable, DirecTV management doesn’t see the cable deal as a proxy for an approval of deal with Dish, said another person familiar with the matter. DirecTV and Dish’s 2002 attempt to merge was blocked by regulators.
DirecTV is the largest U.S. satellite-television operator with about 20 million paying subscribers. Dish is No. 2 with about 14 million subscribers. A deal may be more likely to pass after President Barack Obama’s administration departs, said the person. The key to a deal being approved is how regulators view the market, another person said. If video competition is extended to online services, such as Netflix Inc., a deal could pass, the person said.
‘Business case’
“There is obviously a business case that makes a lot of sense for consolidation in the satellite industry,” Ergen said in November, before the Comcast-Time Warner Cable deal was announced. “You’re going to see consolidation, maybe first in the cable industry,” he said.
“You’re seeing in the government’s part that they do negotiate things within the airline side, so it makes a lot of sense,” Ergen said, referring to the U.S. government’s willingness to negotiate on antitrust issues in the airline industry. While federal regulators initially sued to block American Airlines parent AMR Corp.’s $17.2 billion merger with US Airways Group Inc., in November the companies reached a settlement with the Justice Department that put the merger back on track. “Whether that ever comes to fruition is another story, but I mean I think both Dish and DirectTV realize that that can make a lot of sense.”
White’s concerns
Although White is hesitant to pursue a deal, he hasn’t ruled it out entirely, one person said. The talks are being conducted at a senior level with no official process yet under way, several people said.
White has been openly more wary about a possible combination.
“In about a third of the country, you’d go from three to two” satellite providers, White said in December. “And while I certainly believe our industry has changed substantially and I believe there are a lot of reasons why consolidation in our industry would be pro-consumer to try and improve the balance between programmers and distributors, you still have to go sell that in Washington.”
Shares of DirecTV rose almost 7% to $78.13, giving the company a market value of about $40 billion as of 1:37 p.m. in New York. Dish also gained almost 7%, to $62.23, giving it a market value of about $29 billion.
Darris Gringeri, a spokesman for DirecTV, declined to comment, as did Bob Toevs, a spokesman for Dish.
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This article originally published at Bloomberg
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Read more: http://mashable.com/2014/03/26/possible-dish-directv-merger/
Satellites Align: Dish and DirecTV Could Be the Next Big Media Merger
business, directv, dish network, Media, merger, regulator, Satellite TV, U.S.
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