DALLAS, TEXAS and EL
—AT&T and DirecTV have a agreed to a deal under which
will acquire DirecTV in a stock-and-cash transaction for $95 per share based on
AT&T’s Friday closing price. The agreement has been approved
the boards of both companies.
This purchase price implies a total equity value of $48.5 billion and a total
transaction value of $67.1 billion, including DirecTV’s net debt.
The transaction enables the
combined company to bundle video, high-speed
and mobile services through AT&T’s
2,300 retail stores
and thousands of authorized dealers and agents of both companies
Randall Stephenson, AT&T chairman and
CEO, said the deal creates “immediate and long-term
value for our shareholders. DirecTV is the best option for us because they have the premier
pay TV, the best content relationships, and a fast-growing Latin American
DirecTV has the exclusive pay TV rights to NFL Sunday Ticket that
provides every out-of-market game, every Sunday afternoon, on TV, laptops and
mobile devices. DirecTV’s content ownership
includes 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 after the deal closes.
With the benefits of the transaction, AT&T said it is able to
commit to do the following, when the deal closes:
AT&T said it would use the merger
its plans to build and enhance high-speed broadband service to 15 million
locations, mostly in rural areas where AT&T does not provide high-speed
service today, using a combination of technologies including fiber-to-the-premises
and fixed wireless local loop capabilities. This new commitment, to be
completed within four years after close, is on top of the fiber and Project VIP
broadband expansion plans AT&T has already announced. Customers will be
able to buy broadband service standalone or as part of a bundle with other
- For customers who
only want a broadband service and may choose to consume video through an
over-the-top service like Netflix or Hulu, the combined company will
offer standalone wireline broadband service at speeds of at least 6 Mbps
feasible) in areas where AT&T offers wireline IP broadband service
guaranteed prices for three years after closing.
TV service will continue to be available on a standalone basis at nationwide
prices that are the same for all customers, no matter where they live, for at
least three years after closing.
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 D.C. Circuit Court of
Appeals vacating those rules.
The transaction does
not alter AT&T’s plans to meaningfully participate in the
FCC’s planned spectrum
auctions later this year and in 2015. AT&T intends to bid at least $9
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
a 2x10 MHz nationwide spectrum footprint.
DirecTV’s Latin American business is the leading pay TV
provider in the region and has more than 18 million subscribers, including all
Sky Mexico customers. AT&T said DirecTV’s satellite platform’s reach remains
advantaged when compared with cable and telco in Latin America. Latin America
has an underpenetrated pay TV market—about 40 percent of households subscribe
to pay TV— and a growing middle class, and is DirecTV’s fastest
DirecTV shareholders will receive $95 per share under the
terms of the merger, comprised of $28.50 per share in cash and $66.50 per share
in AT&T stock. The stock portion will be subject to a collar such that
shareholders will receive 1.905 AT&T shares if AT&T stock price
$34.90 at closing and 1.724 AT&T shares if AT&T stock price is
$38.58 at closing. If AT&T stock price at closing is between $34.90 and
$38.58, DirecTV shareholders will receive a number of shares between 1.724 and
1.905, equal to $66.50 in value. This
transaction implies an adjusted enterprise value multiple of 7.7 times
DirecTV’s 2014 estimated EBITDA. Post-transaction, DirecTV shareholders will
own between 14.5 percent and 15.8 percent of AT&T shares on a
fully-diluted basis based on the number of AT&T shares outstanding
AT&T intends to finance the cash portion of the
transaction through a combination of cash on hand, sale of non-core assets,
committed financing facilities and opportunistic debt market transactions.
To facilitate the regulatory approval process in Latin
America, AT&T intends to divest its interest in América
includes 73 million publicly listed L shares and all of its AA shares.
designees to the América Móvil Board of Directors will tender
resignations immediately to avoid even the appearance of any
AT&T expects the deal to be accretive on a free cash flow
share and adjusted EPS basis within the first 12 months after closing.
The combination provides significant opportunities for
operating efficiencies. AT&T expects cost synergies to exceed $1.6
an annual run rate basis by year three after closing. The expected synergies
are primarily driven by increased scale in video.
Along with DirecTV’s current strong cash flows, this
transaction is expected to support future investment in growth opportunities
and shareholder returns.
The combination diversifies AT&T’s revenue mix
provides numerous growth opportunities as it dramatically increases video
revenues, accelerates broadband growth and significantly expands revenues from
outside the United States. Given the structure of this transaction, which
includes AT&T stock consideration as part of the deal and the
of non-core assets, AT&T expects to continue to maintain the strongest
balance sheet in the industry following the transaction close.
AT&T’s 2014 guidance for the company remains
However, the company’s intention is to divest its interest in
which will result in an approximately $0.05 reduction in EPS, as the
investment will no longer be accounted for under the equity method. Adjusted
2014 EPS growth is now expected to come in at the low-end of the
mid-single digit guidance.
The merger is subject to approval by DirecTV shareholders and
by the U.S. Federal Communications Commission, U.S. Department of Justice, a
U.S. states and some Latin American countries. The transaction is expected to
close within approximately 12 months.
DirecTV is the premier pay TV provider in the United States
and Latin America, with a high-quality customer base, the best selection of
programming, the best technology for delivering and viewing high-quality video
on any device and the best customer satisfaction among major U.S. cable and
satellite TV providers. AT&T has a best-in-class nationwide mobile
and a high-speed broadband network that will cover 70 million customer
locations with the broadband expansion enabled by this transaction.