AT&T, TPG Deal Forms Standalone DirecTV Company

(Image credit: AT&T)

DALLAS & NEW YORK—AT&T and private equity platform TPG Capital have agreed to a deal that will establish a new, standalone DirecTV company that will own and operate AT&T’s U.S. video business unit, which consists of DirecTV, AT&T TV and U-verse video services.

AT&T had long been reported as looking to sell a stake in DirecTV, which it acquired back in 2015. Under the terms of this agreement, AT&T will own 70% of the new DirecTV and TPG will own 30%.

“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,” said John Stankey, AT&T CEO. “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.”

Bill Morrow, CEO of AT&T’s U.S. video unit, will take on the role of CEO for the new DirecTV. Two representatives from both AT&T and TPG will help govern the board.

Under the terms of the transaction, AT&T expects to receive $7.8 billion ($7.6 billion in cash and an assumption of $200 million of AT&T’s debt) from DirecTV. TPG will contribute $1.8 billion to DirecTV in exchange for its 30% interest in the company.

“We look forward to working with AT&T, Bill and the entire talented team at the new DirecTV to create a seamless customer experience through the separation of the company,” John Flynn, principal at TPG, said. “We are particularly excited by the opportunity to grow new DIRECTV’s streaming video service, leveraging the company’s leading pay-TV platform, talented labor force and large subscriber base to transition it into a leading next-generation video provider with best-in-class content and customer experience.”

When the deal closes, for those who are current AT&T video subscribers, they will simply transition to being DirecTV customers, maintaining their video service, any bundled wireless or broadband services, HBO Max subscriptions, as well as any associated discounts, AT&T says. In addition, existing content deals, including NFL Sunday Ticket, will be a part of the new DirecTV.

No close date was hinted at by AT&T. The deal will be subject to customary closing conditions and to regulatory reviews.