Sunday, May 18, 2014

AT&T's Bid to Acquire DIRECTIV Brings Subscribers, Content, Cash Flow

AT&T reached a deal to acquire DIRECTV in a stock-and-cash transaction for $95 per share based on AT&T’s Friday closing price, comprising  $28.50 per share in cash and $66.50 per share in AT&T stock. The implied total equity value is $48.5 billion and the total transaction value is $67.1 billion, including DIRECTV’s net debt.

Some key points:
  • DIRECTV has over 20 million satellite-TV customers in the United States and more than 18 million customers in Latin America.
  • DIRECTV has premier content, particularly live sports programming. It has the exclusive pay TV rights to NFL SUNDAY TICKET, ownership of ROOT SPORTS Networks and minority stakes in the Game Show Network, MLB Network, NHL Network and the Sundance Channel.
  • DIRECTV will continue to be headquartered in El Segundo, California, after the deal closes.
  • AT&T expects cost synergies to exceed $1.6 billion on an annual run rate basis by year three after closing. The expected synergies are primarily driven by increased scale in video.
  • To facilitate the regulatory approval process in Latin America, AT&T intends to divest its interest in América Móvil. 

AT&T also announced a number of promises to help achieve regulatory approvals, including:

  1. expanding it broadband network to 15 million more places beyond those already targeted by Project VIP
  2. a commitment to offer broadband service at rates of at least 6 Mbps for customers who want only over-the-top (OTT) service
  3. a commitment to offer DIRECTV’s TV service on a stand-alone basis at nationwide package prices for at least 3 years
  4. a continued commitment for three years after closing to the FCC's Open Internet protections established in 2010, irrespective of whether the FCC re-establishes such protections for other industry participants following the DC Circuit Court of Appeals vacating those rules and
  5. a commitment to meaningfully participate in the FCC’s planned spectrum auctions later this year and in 2015. AT&T intends to bid at least $9 billion in connection with the 2015 incentive auction provided there is sufficient spectrum available in the auction to provide AT&T a viable path to at least a 2x10 MHz nationwide spectrum footprint. 

"This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens – mobile devices, TVs, laptops, cars and even airplanes. At the same time, it creates immediate and long-term value for our shareholders,” said Randall Stephenson, AT&T Chairman and CEO.

“DIRECTV is the best option for us because they have the premier brand in pay TV, the best content relationships, and a fast-growing Latin American business. DIRECTV is a great fit with AT&T and together we’ll be able to enhance innovation and provide customers new competitive choices for what they want in mobile, video and broadband services. We look forward to welcoming DIRECTV’s talented people to the AT&T family."

See also