Resurfacing EchoStar & AT&T Discussions? (DISH, T)

September 27, 2007 by Douglas A. McIntyre

Today’s rally in shares of EchoStar Communications (NASDAQ:DISH) can probably hold its thanks to TheStreet.com putting out an article and video noting that AT&T (NYSE:T) may be closer to acquiring the satellite TV provider.  You can watch the video with Scott Moritz on TheStreet.com that discusses this, and he noted that this has been on and off in the discussion tube for a year or so (and longer than that, see below…).  Mortitz noted there is a spread between AT&T wanting to pay $55 and EchoStar wanting $65, and Moritz noted it should ultimately reach a merger down the road.

If you read our own piece from the other day when EchoStar said it had filed to explore a split-up of itself after acquiring SlingBox.com, a television anywhere over the web company, you’ll see how the follow-on interest has been there.  Just yesterday S&P put the satellite TV operator on credit watch over the lack of definitive information and an unknown structure.

This isn’t the first time this "rumor" or discussion has been around.  Not even by a long shot.  American Technology Research noted this in the opening hours of 2006 and they were not even the first ones to note it then.  Shares are up nearly $20.00 from when this was out in early 2006.

Shares are up 8% today at $46.95 and this gets it within 10% of yearly highs.  Options are often a good judge of these "re-rumors" and even with the pop today the options are for OCTOBER are not signaling that high of a probability.  If you run the math you’d get an implied premium of somewhere in the $49.50 to $51.00 range.  That is higher than yesterday and even higher than Tuesday’s open of $42.73, but still isn’t a major premium compared to today.  This is not a member of our BAIT SHOP of takeover candidates, although it has been on and off a watch list before.

Jon C. Ogg
September 27, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.