AT&T (NYSE: T) agreed to purchase DirecTV (NASDAQ: DTV) in a $49 billion deal that will make the telecom company a major powerhouse in the pay-TV market. AT&T will gain DirecTV's 20 million U.S. subscribers as well as access to a portfolio of content that AT&T will be able to distribute across mobile, video and broadband platforms.
AT&T said it will purchase DirecTV in a stock-and-cash transaction at $95 per share, which is based upon AT&T's Friday closing price. The purchase price implies a total equity value of $48.5 billion and a total transaction value of $67.1 billion, including DirecTV's net debt.
Both companies' boards of directors have approved the deal. However, the transaction must still be approved by the FCC, the U.S. Department of Justice, a few U.S. states and some Latin American countries. The acquisition is expected to close in around 12 months.
AT&T said it will divest its interest in America Movil in order to secure regulatory approval in Latin America, where DirecTV has more than 18 million subscribers. AT&T's designees to the America Movil board of directors will resign immediately.
The combined company will have 26 million pay-TV subscribers in the United States, including AT&T's U-verse video customers. AT&T said it will use the merger to deliver high-speed broadband service to 15 million customers, primarily in rural areas where the company does not provide high-speed service today. This will be on top of the company's existing Project VIP broadband expansion plans that have already been announced.
In addition, AT&T said it plans to offer wireline broadband service at speed of at least 6 Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing.
The AT&T/DirecTV deal comes just three months after Comcast's (NASDAQ: CMCSA) $45.2 billion agreement to buy Time Warner Cable (NYSE: TWC). Experts say that these mega-mergers are a result of the changing media landscape. Companies like AT&T and Comcast are looking for ways to continue to grow their pay-TV businesses and respond to the growth in streaming video and mobile video.
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