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Business News/ Companies / AT&T said to aim to announce DirecTV acquisition by Monday
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AT&T said to aim to announce DirecTV acquisition by Monday

Both boards are scheduled to vote on Sunday on the terms

The purchase, which people have said would value DirecTV at about $50 billion, would give AT&T a national satellite-TV provider to combine with its US wireless service and phone and high-speed Internet offerings. Photo: ReutersPremium
The purchase, which people have said would value DirecTV at about $50 billion, would give AT&T a national satellite-TV provider to combine with its US wireless service and phone and high-speed Internet offerings. Photo: Reuters

New York: AT&T Inc. is aiming to announce an agreement to acquire DirecTV by Monday, according to a person familiar with the matter, adding satellite-TV subscribers as the biggest competitors in the pay-TV industry bulk up.

Both boards are scheduled to vote today on the terms, said the person who asked not to be identified because the information is private. While the two sides had expected the deal to take longer, they made progress on key structures of the transaction in recent days, two people said.

The purchase, which people have said would value DirecTV at about $50 billion, would give AT&T a national satellite-TV provider to combine with its US wireless service and phone and high-speed Internet offerings. AT&T chief executive officer (CEO) Randall Stephenson is using deals to get bigger as competitors Comcast Corp. and Time Warner Cable Inc. plan their own merger and as consolidation accelerates across the entire communications industry.

Brad Burns, a spokesman for AT&T, declined to comment. Darris Gringeri, a spokesman for DirecTV, didn’t respond to requests for comment. BuzzFeed reported on Saturday that the companies were on track to announce the acquisition on Sunday.

DirecTV, which doesn’t have its own phone service or a competitive Internet offering, is under rising pressure to find a partner as more viewers go online for video and the pool of traditional pay-TV customers shrinks in the US.

Under the plan being discussed, management of DirecTV, the largest US satellite-TV provider, will continue to run the company as a unit of AT&T, people familiar with the matter said last week. DirecTV CEO Mike White is likely to retire after 2015, the people said.

Price Talk

A price could come in close to $95 a share, depending on how much cash or stock is in the transaction, another person said last week. The person said White’s future after a merger is also still being negotiated. The price could go as high as $100 a share, two other people said at the time.

With its shares up 25% this year to $86.18, DirecTV had a market value of about $43 billion on 16 May and had about $18 billion in net debt as of 31 March. AT&T is valued at about $191 billion and had net debt of about $76 billion at the end of March.

The question with all of the potential tie-ups in the communications industry is whether regulators will allow them. Comcast’s takeover of Time Warner Cable hasn’t been approved yet. A merger of DirecTV and satellite-TV rival Dish Network Corp. was blocked more than a decade ago, and AT&T had to abandon a purchase of T-Mobile in the US several years ago in the face of antitrust opposition.

Termination Fee

The need for regulatory approval makes the size of a termination fee important in the AT&T-DirecTV deal structure. The breakup fee would to go DirecTV from AT&T if the deal falls apart for various reasons, including being blocked by regulators on antitrust grounds. In AT&T’s failed effort to acquire Deutsche Telekom AG’s T-Mobile US unit in 2011, the company paid out $3 billion in cash plus wireless frequencies and a roaming agreement.

DirecTV and AT&T are planning on a 12-month regulatory process to review the deal, a person with knowledge of the matter has said.

DirecTV would give AT&T, the second-biggest US mobile- phone carrier, a pay-TV business that’s expanding in Latin America and that’s getting US customers to pay increasingly higher monthly bills. DirecTV’s exclusive content includes the National Football League Sunday Ticket package and products such as Genie, a multiroom digital video recorder. DirecTV has 20.3 million US customers and 18.1 million in Latin America, including Sky Mexico, of which it owns 41%.

America Movil

Getting ownership of DirecTV’s Latin American units would cause a conflict for AT&T, which holds an 8% stake in America Movil SAB—a direct competitor to DirecTV in countries including Brazil and Colombia. DirecTV’s Latin America operation includes the minority stake in Sky Mexico, which is controlled by Grupo Televisa SAB, one of America Movil’s biggest rivals.

Comcast’s plan to acquire Time Warner Cable will create an even bigger provider of both TV and Internet in the US. In March, AT&T’s Stephenson called the Time Warner Cable takeover an industry-redefining deal.

A deal with DirecTV shows that AT&T has turned its attention back to the US market since the Time Warner Cable takeover was announced. AT&T had previously explored wireless opportunities in Europe, such as acquiring Vodafone Group Plc.

Since then, Bloomberg reported in March that DirecTV had also drawn merger interest from Dish chairman Charlie Ergen. While a DirecTV merger is tempting, the US satellite-TV rival is too expensive to pursue, Ergen said earlier this month on a conference call to discuss first-quarter earnings.

One of the biggest beneficiaries of DirecTV’s rally this year is Warren Buffett’s Berkshire Hathaway Inc., thanks to a stake built by his deputy stock pickers at about half the current price. Berkshire had about 34.5 million shares as of 31 March, a regulatory filing showed last week. Bloomberg

Crayton Harrison, Scott Moritz and Alex Sherman in New York and Bernard Kohn in Washington also contributed to this story.

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Published: 18 May 2014, 09:52 AM IST
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