AT&T Inks DirecTV Deal With Private Equity Firm TPG; Warner Media Parent Will Retain 70%, Net $7.8 Billion In Cash

WarnerMedia parent AT&T said Thursday it’s clinched a deal to sell a significant minority satellite in DirecTV, U-Verse and AT&T TV to private equity group TPG in a deal will net the telecom giant  $7.8 billion in cash.

The partners said they will establish a new company named that will own and operate AT&T’s U.S. video business unit consisting
of the DIRECTV, AT&T TV and U-verse video services.

The deal values DirecTV’s video business at $16.25 billion.

Under the terms of the transaction, the 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 own 70% of the common equity and TPG will own 30%.

AT&T and TPG said they “believe the new structure will provide greater focus, flexibility and resources to best position the business to succeed in the long term and deliver on its commitment to customers, employees and shareholders. New DIRECTV will continue to offer a competitive video service with best-in-class content.”

AT&T acquired the satellite broadcaster in 2015 for $48.5 billion — or $67 billion including debt. But the service has been leaking subscribers and AT&T has moved away from traditional pay TV with the 2018 purchase of Time Warner and launch of direct-to-consumer streamer HBO Max.

DirecTV, U-Verse and AT&T TV Now are all based around a linear television model of broadcast and cable networks that still bring in lots of cash but are in secular decline. The sale is one of the biggest moves yet by John Stankey, who took the reins at AT&T CEO last summer,

AT&T lost nearly 3 million video customers last year. It also recorded a $15.5 billion impairment charge it a re-valuation of its domestic video business.

The telcom giant has been steadily unloading assets to drive down its debt of about $150 billion. In December, it announced a sale of anime streaming service Crunchyroll to Sony’s Funime for $1.18 billion. It also sold its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands and last year divested its majority stake in Central European Media for $1.1 billion. Execs have said they’re looking at real estate sales. And unconfirmed rumors have bubbled that AT&T might even be willing to sell CNN.

Activist hedge fund Elliott Management took a stake in AT&T several years ago, urging it to focus its business and divest noncore assets.

A merger of DirecTV and smaller rival Dish was initially considered a possibility but would have raised antitrust issues. The FCC rejected a proposed combination of the two satellite broadcasters once before, in 2002.

Other were said to be circling DirecTV as well, including Apollo Global Management and, according to Bloomberg, a blank-check company, or SPAC, backed by former Citigroup exec Michael Klein. (Klein’s vehicle announced a deal this week with electric carmaker Lucid Motors.) Apollo Global Management also had talks about a possible transaction.

AT&T launched AT&T TV in March 2020 to provide DirecTV channels over internet streaming rather than satellite. AT&T TV was designed to replace DirecTV and traditional cable TV. It features live TV channels — including ABC and Fox, plus cable channels such as ESPN, TNT, Nickelodeon and HGTV — that are streamed over the internet.