Feb. 25, 2021, 5:01 p.m. EST

AT&T to make DirecTV its own company with TPG taking 30% stake

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By Emily Bary

AT&T Inc. and TPG Capital have inked an agreement that will make AT&T’s struggling DirecTV video business a separate company.

The arrangement will create a new company named DirecTV and implies an enterprise value for the new company of $16.25 billion including debt and the elimination of up to $2.5 billion in NFL Sunday Ticket losses. TPG Capital, the private-equity unit of TPG, will take a 30% stake in the business.

AT&T /zigman2/quotes/203165245/composite T +0.85% purchased the DirecTV business for $49 billion in 2015.

The new company will house the DirecTV, AT&T TV, and U-Verse businesses. The companies expect the deal to close in the second half of this year.

AT&T expects to receive $7.8 billion from the new DirecTV upon the close of the deal, of which $7.6 billion will be in cash and $200 million will be the assumption from AT&T of existing DirecTV debt. AT&T plans to use the proceeds from the transaction to reduce its own debt. TPG will contribute $1.8 billion in cash to the new company.

The company took a $15.5 billion charge on its video business last quarter as the company continued to bleed subscribers. It lost 617,000 “premium video” subscribers across its DirecTV and U-verse platforms in the fourth quarter.

AT&T has been under pressure to raise money through asset sales to help with a costly bill for wireless spectrum that the company won at a recent auction. AT&T committed to $23 billion worth of spectrum purchases at a crucial 5G auction, the Federal Communications Commission disclosed Wednesday afternoon.

Shares of AT&T were up 0.6% in after-hours trading Thursday after declining 2.6% in the regular session following the release of the auction results.

AT&T’s stock has dropped 23% over the past 12 months as the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.64% has added 22%.

/zigman2/quotes/203165245/composite
US : U.S.: NYSE
$ 30.15
+0.25 +0.85%
Volume: 13.09M
April 21, 2021 12:20p
P/E Ratio
N/A
Dividend Yield
6.90%
Market Cap
$213.37 billion
Rev. per Employee
$746,783
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/zigman2/quotes/210599714/realtime
US : S&P US
4,161.33
+26.39 +0.64%
Volume: 888.31M
April 21, 2021 12:20p
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