Blog Post

Sling-DISH: EchoStar Explores Spin-off Into Two Public Companies

EchoStar Communications (NSDQ: SATS), which just last night announced plans to acquire Sling Media, said this morning it will explore a possible split into two publicly traded companies, one focusing on its consumer pay-TV business DISH Network and the other on its technology and infrastructure businesses.

I suggested last night that a spin-off of Sling Media was being considered. The way the announcement from EchoStar is written it appears as though the company was already considering the possibility of a spin-off of its tech assets. It goes a long way toward explaining the allure of Sling for Charlie Ergen and company at this moment — a known tech brand with global growth potential — and one reason the deal with Sling could be valued at far more than $380 million price tag attached to the sale. But the language also leaves plenty of wiggle room for a step back and a decision to stay intact, likely to be the case if the IRS returns a ruling that it would not be tax-free.

From a statement by EchoStar Chairman and CEO Charlie Ergen: “We believe separation of our consumer-based and wholesale businesses could unlock additional value. Each company would be able to separately pursue the strategies that best suit its respective long-term interests. The spin-off transaction would also allow employee incentives to be tied to their respective company’s performance, and improve opportunities to effectively develop and finance expansion plans,”

Some details:

— EchoStar already has asked the IRS for a ruling on the tax-free status of a spin-off.

— The consumer pay-TV business would continue to operate as the DISH network.

— In addition to Sling, most of EchoStar’s other technology and infrastructure assets would be spun-off: the set top box design and manufacturing business, its international operations, and assets used to provide fixed satellite services to third parties, together with satellites, uplink centers and spectrum licenses not considered core to DISH Network’s subscriber business. For a sense of the role Sling might play, the acquisition is mentioned in the announcement as an illustration of “EchoStar’s commitment to delivering best-in-class consumer technology products enabling customers to enjoy their content anywhere, any time.”

— Ergen would be chairman and CEO of each company. Less clear so far: whether Carol Vogel, president and vice chairman, will hold the same postion for each or run one. Vogel is the former CEO of Charter Communications (NSDQ: CHTR). Between that and EchoStar, Vogel has considerable experience on the consumer subscription side. If a spin-off is successful, could that leave room for Sling Media chairman and CEO Blake Krikorian to head the tech company?