AT&T has officially announced a deal with TPG Capital to sell a minority stake in its linear video businesses DirecTV, U-verse and AT&T TV.
AT&T and TPG have agreed to establish a new company named DirecTV that will own and operate the three video services. The companies said that the deal implies an enterprise value for the new company of $16.25 billion.
AT&T will own 70% of the common equity and TPG will own 30% for New DirecTV. The company will be run by Bill Morrow, who is currently CEO of AT&T’s U.S. video segment.
The transaction is expected to close in the second half of 2021. AT&T expects to receive from $7.8 billion from New DirecTV, which it will use to reduce its debt. TPG will contribute $1.8 billion in cash to New DirecTV in exchange for preferred units and a 30% interest in common units of New DirecTV.
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“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 in a statement. “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.”
“Video remains a core service for tens of millions of households. Since its launch in 1994, DirecTV has continually evolved its product, content and service to provide customers an industry-leading video offering. As video consumption habits evolve, the new DirecTV will continue investing in its offering to provide value to its customers, including through next-generation streaming pay TV services,” said David Trujillo, partner at TPG, in a statement. “TPG looks forward to partnering with AT&T and new DirecTV leadership to bring the right focus, attention and execution in support of new DirecTV’s position as a competitive video provider for the benefit of its customers and employees.”