News
Minority stakeholder TPG Capital will assume full company ownership
AT&T has announced that it will sell its remaining 70% stake in satellite TV provider DirecTV to private equity firm TPG Capital for $7.6 billion, marking its full exit from the pay-TV market.
TPG, which already owns 30% of the business, will take full control of the company, according to an SEC filing on Monday.
AT&T acquired DirecTV in 2015 for $67 billion (including debt), banking on the pay-TV market continuing to grow. However, the boom of streaming platforms like Netflix and Amazon Prime meant this growth never came. DirecTV’s value fell steadily, with the company valued at around $16.25 billion when TPG Partners bought a 30% stake for $1.8 billion in2021.
Writing in the Financial Times noted yesterday, Robert Armstrong said that “there is no doubt that the DirecTV deal turned out badly for AT&T.”
“Two big things happened to make the DirecTV deal a failure. The bottom fell out of the traditional pay-TV market as streaming grew, and the synergies the dealmakers saw in the combination never materialised,” he continued.
The sale is necessary, said AT&T in a statement, in order for the telco “to continue to focus on being the leading wireless 5G and fiber connectivity company in America.”
“This transaction also continues to strengthen AT&T’s balance sheet by pulling forward cash expected over the next several years.”
Simultaneously, DirecTV is also acquiring DISH TV for just $1 as part of a larger debt-exchange deal between DirecTV and EchoStar, DISH’s parent company. Rather than paying a large sum upfront, DirecTV is taking on DISH TV’s $9.75 billion debt pile.
The merger will form the biggest pay-TV provider in the US with 18 million subscribers, and is expected to cut costs, offer more affordable packages, and improve its streaming options.
“The merger was inevitable… These are both melting ice cubes with plenty of competition increasingly being delivered over the Internet in the vast majority of the US, and they will be better positioned to navigate that environment post a merger,” said Jeff Wlodarczak, analyst at Pivotal Research Group speaking to Reuters.
Both transactions are expected to close in the latter half of next year.
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