AT&T to Spin Off DirecTV in $7.8 Billion Deal With TPG Capital

TPG will own 30% of the new company and kick in $1.8 billion

AT&T will spin off its video business including DirecTV into a new company in a deal with TPG, which acquired 30% of the new company. The agreement values the forthcoming company, known as New DirecTV, at $16.25 billion.

Under the terms of the transaction, New DirecTV will be jointly governed by a board with two representatives from each of AT&T and TPG, as well as a fifth seat for the CEO, which at closing will be Bill Morrow, CEO of AT&T’s U.S. video unit. Following the close of the transaction, AT&T will own70% of the common equity and TPG will own 30%.

Upon close of the transaction, AT&T will receive around $7.8 billion in cash. That is comprised of $7.6 billion in cash (the $1.8 billion contributed by TPG, plus $5.8 billion raised by DirecTV) and $200 million of existing DIRECTV debt.

“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 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.”

More to come…

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