ENGLEWOOD, Colo. – EchoStar Communications Corporation announced Monday that its Board of Directors has directed Management to pursue a possible separation of its businesses into two distinct publicly traded companies.
EchoStar, which has technology supply contracts in Canada with Bell ExpressVu and world-wide, recently submitted a request to the Internal Revenue Service for a ruling as to the tax-free nature of the transaction.
Under the proposed plan, EchoStar’s U.S. consumer pay-TV business would continue to operate as the DISH Network. Most of the company’s other technology and infrastructure assets would be spun-off in a transaction intended to be tax-free to EchoStar and its shareholders.
Upon completion of the spin-off transaction, the shareholders of EchoStar would have separate pro rata ownership interests in each company.
“We believe separation of our consumer-based and wholesale businesses could unlock additional value,” said Charlie Ergen, EchoStar Chairman and CEO.
“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,” he said in a statement.
The transaction would be transparent to DISH Network’s U.S. DBS customers, the company said. Installation, customer service, billing and other consumer services would continue to be operated by DISH Network, together with most satellites and spectrum used to support that subscriber base.
Ergen would continue to serve as Chairman and CEO of DISH Network, and would fill the same roles with the spun-off company.
The spin-off assets would include, among other things, EchoStar’s 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.
The spin-off is subject to certain conditions, including, among others, final approval by EchoStar’s board of directors of the transaction, effectiveness of a securities registration statement, confirmation that the spin-off will qualify as a tax-free transaction for EchoStar and its shareholders, and receipt of regulatory and other necessary approvals.
EchoStar is preparing a registration statement for filing with the Securities and Exchange Commission in connection with the spin-off. The registration statement will include important information about the Company, the proposed spin-off and related matters. Shareholders are urged to read the registration statement if and when it becomes available.
