AT&T and TPG Capital completed their previously announced transaction establishing a new company named DIRECTV.
The new company will own and operate the DIRECTV, AT&T TV and U-verse video services previously owned and operated by AT&T. DIRECTV had approximately 15.4 million premium video subscribers at the end of the second quarter of 2021.
AT&T contributed its U.S. video business unit to the new entity in exchange for preferred units as well as a 70% interest in the common units of DIRECTV. TPG contributed approximately $1.8 billion in cash to DIRECTV in exchange for preferred units and a 30% interest in common units of the new company. The DIRECTV board will include Bill Morrow, CEO of DIRECTV, and the following additional voting board members: Steve McGaw and Thaddeus Arroyo, appointed by AT&T; and David Trujillo and John Flynn, appointed by TPG.
At close, AT&T received $7.1 billion in cash ($7.6 billion net of approximately $470 million cash on hand) and transferred approximately $195 million of video business debt. AT&T expects this transaction will help support its debt reduction efforts, with plans to reach a net debt-to-adjusted EBITDA of below 2.5x by year-end 2023.1
Not included in this transaction are WarnerMedia’s HBO Max streaming platform and regional sports networks, both of which are part of the pending WarnerMedia-Discovery transaction; Vrio (AT&T’s Latin American video operations, which are being sold to Grupo Werthein); U-verse network assets; and AT&T’s Sky Mexico investment. DIRECTV will continue to offer HBO Max to subscribers along with any bundled wireless or broadband services and associated customer discounts.
