Merrill Lynch reiterates its buy rating on EchoStar Communications (DISH).
Vivendi Universal will sell its 10% stake in EchoStar to the company for $1.066 billion cash, or $18.50 per share, a 15% discount to Tuesday's close, well below Vivendi's $26 per EchoStar share purchase price.
Analyst Marc Nabi says he views the removal of the Vivendi overhang as an extremely positive, accretive transaction. He notes this information was not widely expected by investors. Adjusting for the transaction, he raised his year-end 2003 discounted cash flow valuation for EchoStar by $2 to $30 -- 17.8 times the 2003 EBITDA estimate.
Nabi also upgraded the 2004 earnings per share estimate by three cents to $1.07. He says EchoStar is his favorite name in the satellite communications space.