AT&T to buy US satellite-television provider DirecTV for $48.5 bn
19 May 2014
US telecom giant AT&T Inc. yesterday agreed to buy satellite-television provider DirecTV in a $48.5-billion stock-and-cash deal, the latest multi-billion mega deal to be announced in the telecommunications industry.
The deal will further add to the coffers of Warren Buffett's investment arm Berkshire Hathaway, which is DirecTV's top shareholder with 34 million shares, or a 6.85-per cent stake.
Under the $95-a-share deal aimed at securing valuable wireless airwaves, AT&T is offering to pay $28.50 in cash and $66.50 in stock, a 10-per cent premium to DirecTV's closing price of $86.18 on Friday.
The deal has a total value of $67.1 billion, including DirecTV's net debt.
AT&T plans to fund the cash portion of the transaction through cash on hand, asset sales and committed financing facilities, and expects cost synergies to exceed $1.6 billion on an annual run rate basis three years after closing.
In order to ease regulatory concerns, the Dallas-based company plans to sell its 8.4-per cent stake worth around $6 billion in Mexican telecom company América Móvil SAB.
The transaction would not only require approval from its shareholders, but also federal and some state and several Latin American regulators.
A successful deal would combine the second-largest wireless carrier in the US with the largest satellite television company in the country exceeding Comcast's planned $45-billion acquisition of Time Warner Cable, (See: Time Warner Cable to merge with Comcast in $45-bn deal)
With more than 32 million customers in the US and Latin America, DirecTV customers make up nearly 20-per cent of all US cable and satellite subscribers.
DirecTV offers more than 285 channels with more than 170 HD channels in Dolby-Digital 5.1 theater-quality sound.
The California-based company boasts a strong portfolio in sports programming, which includes NFL Sunday, Ticket, NHL, Center Ice, and NBA League Pass.
A merged AT&T-DirecTV would hold a large chunk of wireless spectrum and enable it to better compete against industry leader Comcast.
The deal will allow DirecTV to offer broadband internet for the first time to its customers in the US.
"It gives us the parts to fulfill a vision we have had for a couple of years, that is, the opportunity and the ability to take premium content and deliver premium content over multiple points for the customer, whether it be through a smartphone, through a tablet, or television or laptop," said AT&T CEO, Randall Stephenson.
AT&T said it expected to be able to add 15 million broadband customers, mostly in rural areas, within four years of closing.
With a market cap of $185 billion, AT&T, founded in 1876 by Alexander Graham Bell, is one of the leading providers of IP-based communications services to businesses.
It is the second-largest provider of mobile telephony with 250 million customers and the largest provider of fixed telephony in the US.
It also provides broadband subscription television services, and has the largest international coverage of any US wireless carrier, owning and operating more than 34,000 Hot Spots at popular locations such as restaurants, bookstores, and hotels.
''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 – mobile devices, TVs, laptops, cars and even airplanes,'' said Stephenson.
''US consumers will have access to a more competitive bundle; shareholders will benefit from the enhanced value of the combined company; and employees will have the advantage of being part of a stronger, more competitive company, well positioned to meet the evolving video and broadband needs of the 21st century marketplace,'' said, Mike White, president and CEO of DirecTV.