AT&T Inc (T) To Buy DirecTV (DTV) In $49 Billion Deal

AT&T LogoBy AT&T [Public domain], via Wikimedia Commons

AT&T Inc. (NYSE:T) announced Sunday that it has reached a definitive agreement to acquire DirecTV (NASDAQ:DTV) in a stock-and-cash transaction of $95 per share.

The agreement has been approved unanimously by the Boards of Directors of both companies.

To combine complementary strengths

It was reported recently that AT&T Inc. (NYSE:T) and DIRECTV (NASDAQ:DTV) were in talks about a combination of their own. A deal between the two would create a pay-television behemoth that would serve over 25 million subscribers.

AT&T Inc. (NYSE:T) needs to make a deal to keep up with Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK) given the looming Time-Warner merger and that DirecTV also needs to make a deal to keep up with the competition.

In its statement Sunday, AT&T Inc. (NYSE:T) said the deal with DirecTV combines complementary strengths to create a unique new competitor with unprecedented capabilities in mobility, video and broadband services.  Mike White, president and CEO of DirecTV said: “This compelling and complementary combination will bring significant benefits to all consumers, shareholders and DirecTV employees”.

A low-down on the deal

As part of the deal, AT&T Inc. (NYSE:T) is offering $95 per DirecTV share in a combination of stock and cash. The cash portion of $28.50 per share will be financed by cash, asset sales, financing already lined up and other ‘opportunistic debt market transactions’.

AT&T Inc. (NYSE:T) said it anticipates the takeover to deliver cost savings at an annual rate of $1.6 billion by the third year after closing. To facilitate regulatory approval, AT&T will sell its roughly 8% stake in Carlos Slim’s America Movil.

The transaction has a total value of $67.1 billion, including DirecTV’s net debt.

The latest announcement from AT&T Inc. (NYSE:T) comes just three months after Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK)’s $45 billion agreement to buy Time Warner Cable Inc. The recent deals highlight how the biggest companies in television and telecommunications are bulking up to face a changing media landscape.

Interestingly, in March, it was reported Charlie Ergen, CEO of DISH Network Corp (NASDAQ:DISH), approached Mike White, CEO of DirecTV to discuss the possibility of combining the two satellite television service providers.

AT&T Inc. (NYSE:T) is likely to face some questions from regulators about the latest deal’s impact on competition in those areas where its U-verse service now competes with DirecTV (NASDAQ:DTV) in offering television.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports