AT&T agrees to buy DirecTV in $48.5BN deal
| 19 May 2014
US communications company AT&T has at last agreed to buy No 2 US pay-TV operator DirecTV for about $48.5 billion, adding to the consolidation frenzy that's shaping up in the country.
The boards of both companies approved the merger on Sunday (18 May), with AT&T agreeing to pay the satellite leader's shareholders $95 per share – $28.50 per share in cash and $66.50 per share worth in AT&T stock. Including DirecTV's debt, the total value of the transaction is actually about $67.1 billion.
Shareholders will receive 1.905 AT&T shares if AT&T stock price is below $34.90 at closing, or 1.724 AT&T shares if its stock price is above $38.58. If AT&T's stock price at closing is between $34.90 and $38.58, DirecTV shareholders will receive between 1.724 and 1.905 shares of AT&T stock, equal to $66.50 in value.
"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," said Randall Stephenson, AT&T's chairman and CEO, in a statement on Sunday.
The acquisition surprised some who expected the telco to quest instead after DISH Network, which holds valuable nationwide spectrum that AT&T can use to further its LTE ambitions. But the DirecTV seems to be all about the triple-play, giving AT&T a nationwide video install base to which it can sell broadband, a service DirecTV doesn't have. And, it expands its video presence significantly from existing U-verse IPTV markets. In short, AT&T will have more flexibility in bundling services.
AT&T has about 5.7 million video customers in 22 states. DirecTV has about 20 million customers nationwide and is the second-largest pay-TV provider behind Comcast. It also has 18 million customers in Latin America, a region AT&T has no existing business in.
If approved by regulators, DirecTV will operate as AT&T's subsidiary and continue to be based in its current headquarters in El Segundo, Calif.
The announcement comes as Comcast attempts to win approval to buy No 2 cable MSO Time Warner Cable for about $45 billion. Conventional wisdom holds that if the Department of Justice and other regulators say yes to Comcast then it will be forced to also say yes to AT&T.