EL SEGUNDO, CALIF. — The news first stirred up the television industry on Friday afternoon, with unconfirmed reports suggesting an announcement was imminent even permeating lunchtime conversations around various restaurants inside The Point.
Indeed, such official word arrived before Monday’s sunrise on the West Coast of the U.S.: DirecTV is acquiring EchoStar’s video distribution business, including DISH TV and Sling TV services.
The combination of the two direct broadcast satellite (DBS) service providers comes decades after Sirius Satellite Radio and XM Satellite Radio, once fierce rivals in the space, merged.
As the two TV services sees it, “The combination of DirecTV and DISH is expected to provide U.S. consumers with more flexibility and better value in the highly competitive video industry currently dominated by large tech companies and programmers.”
As a combined company, how this could impact retransmission consent agreements with broadcast TV companies could be met with some resistance. Yet, DirecTV says it expects “to be better able to work with programmers to deliver smaller content packages at lower price points and bring together multiple content sources in one easily accessible place” — just as it did earlier this month with The Walt Disney Company when it ended a contentious impasse preventing DirecTV consumers from accessing ESPN, ABC Owned Stations properties and any other Disney-owned cable channel for days.
“The transaction will also improve EchoStar’s financial profile as it continues to enhance and further deploy its new 5G Open RAN wireless network,” DirecTV said.
DirecTV will continue to be led by CEO Bill Morrow and CFO Ray Carpenter, a central figure in its tense carriage fee dispute with The Walt Disney Co., earlier this month.
The combined company will remain headquartered in El Segundo, a city located just south of Los Angeles International Airport.
A DEBT EXCHANGE IS EXECUTED
How will the transaction that some may say is years in the making come together?
To make it happen, the “DISH DBS” unit of EchoStar and DirecTV have commenced a Exchange Offer for five different series of DISH DBS notes with a total face value of approximately $9.75 billion, “including seeking certain consents from the holders of such notes to facilitate the acquisition.”
Commenting on the deal, DirecTV CEO Morrow said, “DirecTV operates in a highly competitive video distribution industry. With greater scale, we expect a combined DirecTV and Dish … to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers’ interests, and to be better positioned to realize operating efficiencies while creating value for customers through additional investment.”
Hamid Akhavan, President and CEO at EchoStar, added, “This agreement is in the best interests of EchoStar’s customers, shareholders, bondholders, employees, and partners … This will provide U.S. wireless consumers with more choices and help to drive innovation at a faster pace. We expect Dish and EchoStar bondholders to benefit from two companies with stronger financial profiles and more sustainable capital structures.”
TPG TO ACQUIRE AT&T STAKE
While the DirecTV/Dish merger has been expected, so was the end of AT&T’s stake in DirecTV.
David Trujillo and John Flynn, Partners at TPG (formerly Texas Pacific Group), confirmed that AT&T will sell its entire 70% stake in a non-contingent transaction “subject only to customary closing conditions” to the private equity group.
Speaking of the pending EchoStar deal, they said in a prepared statement, “Our ability to execute these transactions, alongside our proposed acquisition of AT&T’s 70% stake in DirecTV announced, exemplifies the unique capabilities of the TPG platform and our experienced sector-focused investment approach as we support DirecTV’s continued investment in innovating the next generation of video services that benefit consumers.”
Over the past three years, TPG says, the private equity group achieved financial outcomes “consistent with its expectations” that underpinned its decision to retain a 70% financial interest in DirecTV.
“Reported cash distributions at, and since, the closing of its initial transaction with TPG totaled $19 billion and the company expects to report an additional $7.6 billion of cash payments following this agreement to sell its remaining stake.”
For AT&T, the divestment of its DirecTV stake allows it to continue to focus wireless 5G and fiber connectivity company while strengthening AT&T’s balance sheet “by pulling forward cash expected over the next several years.”
The company expects the transaction to close in the second half of 2025.
BEHIND THE FINANCING, AND THE LEGAL TEAM
- PJT Partners is acting as lead financial advisor to DirecTV.
- Barclays is acting as lead financial advisor to TPG.
- J.P. Morgan is acting as lead financial advisor to EchoStar.
- BofA Securities, Evercore, LionTree and Morgan Stanley also provided financial advice to DirecTV and TPG.
- Ropes & Gray LLP, Crowell & Moring LLP and HWG LLP, are acting as legal counsel to DirecTV.
- Ropes & Gray LLP, Cleary Gottlieb Steen & Hamilton LLP and Mintz, Levin are providing regulatory advice to TPG.
- White & Case LLP and Steptoe & Johnson PLLC are acting as legal counsel to EchoStar.
