AT&T reached a deal with TPG Capital, a private equity firm, to establish a new company named DIRECTV that will own and operate AT&T’s U.S. video business unit, which includes the current DIRECTV, AT&T TV, and U-verse video services.
Under the deal, AT&T will own 70% of the common equity of the new company and TPG will own 30%. The transaction to separate AT&T’s U.S. video business into New DIRECTV implies an enterprise value for the new company of $16.25 billion.
“This agreement aligns with our investment and operational focus on connectivity and content, and the strategic businesses that are key to growing our customer relationships across 5G wireless, fiber and HBO Max. And it supports our deliberate capital allocation commitment to invest in growth areas, sustain the dividend at current levels, focus on debt reduction and restructure or monetize non-core assets,” said AT&T CEO John Stankey. “As the pay-TV industry continues to evolve, forming a new entity with TPG to operate the U.S. video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability. TPG is the right partner for this transaction and creating a new entity is the right way to structure and manage the video business for optimum value creation.”
AT&T Completes Acquisition of DIRECTV
AT&T completed its acquisition of DIRECTV, making it the largest pay TV provider in the United States and the world, providing service to more than 26 million customers in the United States and more than 191 million customers in Latin America, including Mexico and the Caribbean. Additionally, AT&T has more than 132 million wireless subscribers and connections in the U.S. and Mexico; offers 4G LTE mobile coverage to nearly 310 million people in the U.S.; covers 57 million U.S. customer locations with high-speed Internet; and has nearly 16 million subscribers to its high-speed Internet service.
DIRECTV shareholders received 1.892 shares of AT&T common stock, in addition to $28.50 in cash, per share of DIRECTV. The implied total equity value is $48.5 billion and the total transaction value is $67.1 billion, including DIRECTV’s net debt.
AT&T said the DIRECTV acquisition significantly diversifies its revenue mix, products, geographies and customer bases. As a result of this acquisition, as well as AT&T’s acquisition of Iusacell and Nextel Mexico, AT&T expects that, by the end of 2015, its largest revenue streams will be, in descending order: Business Solutions (both wireless and wireline); Entertainment & Internet; Consumer Mobility; and International Mobility and Video.
