AT&T spins off pay-TV lines into separate video business unit | Media Investment | Business | News | Rapid TV News
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Just as it revealed that it had invested $23.4 billion in gaining 5G spectrum in the US, comms giant AT&T signs definitive agreement with private equity platform TPG Capital to form a new company to own and operate its US video business unit .
DirectTV 26Feb2021
AT&T says the transaction to separate the US video business into the New DIRECTV - which consist of the DIRECTV, AT&T TV and U-verse video services - implies an enterprise value for the new company of $16.25 billion. New DIRECTV will be jointly governed by a board with two representatives from each of AT&T and alternative asset firm TPG, TPG Capital’s parent, as well as a fifth seat for the CEO, which at closing is set to be Bill Morrow, current CEO of AT&T’s US video unit. Following the close of the transaction, AT&T will own 70% of the common equity and TPG will own 30%.

When the transaction closes, set for the second half of 2021, AT&T expects to receive from New DIRECTV $7.8 billion, $7.6 billion in cash and the assumption from AT&T of $200 million of existing DIRECTV debt. AT&T said that it would likely use the proceeds from this transaction to reduce AT&T debt. TPG will contribute $1.8 billion in cash to New DIRECTV in exchange for preferred units and a 30% interest in common units of New DIRECTV. New DIRECTV has secured $6.2 billion in committed financing from its bank group, $5.8 billion of which is expected to be paid to AT&T in cash plus the assumption from AT&T of $200 million of existing DIRECTV debt.

AT&T and TPG say 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. “This agreement aligns with our investment and operational focus on connectivity and content, and the strategic businesses that are key to growing our customer relationships across 5G wireless, fibre and HBO Max. And it supports our deliberate capital allocation commitment to invest in growth areas, sustain the dividend at current levels, focus on debt reduction and restructure or monetise non-core assets,” explained AT&T CEO John Stankey.

“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.”

While AT&T said that New DIRECTV would continue to offer a competitive video service with best-in-class content, it confirmed that its portfolio would not include AT&T’s WarnerMedia HBO Max streaming platform, Vrio (AT&T’s Latin American video operations), AT&T’s regional sports networks, U-verse network assets and AT&T’s Sky Mexico investment.

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