A DISH Network Corp. (DISH)/DIRECTV (DTV) Merger Would Be Golden

Ergen clearly believes the industry is moving away from pay-TV all or nothing programming bundle, and he has expressed admiration with what Netflix has done with House of Cards. Even if the two companies do not merge, we would not be surprised to see DISH Network Corp. (NASDAQ:DISH) enter the content space, but deeper pockets could give a combined company an even greater chance at success, as well as a greater audience (approximately 34 million householders) to charm. Even if the industry remains in flux, Ergen’s adaptability and increased financial flexibility, could allow a new company to thrive.

Feasibility

There’s little doubt, in the view of our team at Valuentum, that Ergen wants to merge his company with DirecTV. He tried over 10 years ago, but the FCC and regulators rejected the deal on the premise of monopoly creation. We think the environment is completely different now due to the rise of chord cutting, but it’s hard to ignore the regulatory hurdles that have stifled mergers in the past few years.

DIRECTV (NASDAQ:DTV) CEO Mike White indicated that a merger would be “pro-consumer” due to the rising costs of content. In our view, DirecTV also sees the logic and appeal of a deal, and we are pretty optimistic that both sides would want to get a deal done. Both firms look fairly valued at this time, but we think a deal between the two would create a much more attractive combined entity. We’ll keep a close eye on the situation.

The article A Dish/DirecTV Merger Would Be Golden originally appeared on Fool.com and is written by RJ Towner.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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