AT&T Inc. (NYSE: T) on Thursday announced that it has signed a definitive agreement with private equity firm TPG Capital to establish a new company that will own and operate AT&T’s U.S. video business. Included in the new firm are satellite provider DirecTV, AT&T TV and U-verse internet service.
According to the announcement, the new company has an implied enterprise value of $16.25 billion. AT&T expects to receive $7.6 billion in cash and $200 million in assumed debt when the deal is completed, now projected to be in the second half of this year. AT&T said it plans to use the funds to pay down debt.
If there’s one thing AT&T has, it’s plenty of debt. At the end of December, the company reported long-term debt of $153.8 billion. About $48 billion of that debt originated with the 2015 acquisition of DirecTV. Another $85 billion originated with the acquisition of Time Warner. Most of the rest likely went to pay for 5G spectrum.
Earlier this month, for example, AT&T received a $14.7 billion loan from Bank of America to purchase more spectrum. The company ultimately ended up spending $23.4 billion in the recent FCC auction of C-band spectrum. Rival Verizon spent nearly double that amount ($45.4 billion), while T-Mobile coughed up just $9.3 billion because it had already amassed some 250 MHz of C-band spectrum with its acquisition of Sprint.
AT&T will own a 70% interest in the common units of “new DirecTV” and TPG will own the rest. The new company will have a commercial agreement with AT&T to continue offering pay-TV services and HBO MAX streaming services to AT&T’s wireless and internet customers.
DirecTV has lost some 9 million customers since its acquisition by AT&T. The company took a $15.5 billion impairment charge in the fourth quarter to account for the lower value of the DirecTV business.
The announcement sent AT&T shares down about 2.6% on Thursday to $28.63, in a 52-week range of $26.08 to $38.22. The consensus price target on the stock is $29.87, and AT&T pays a dividend yield of 7.08%.
24/7 Wall St.Take This Retirement Quiz To Get Matched With A Financial Advisor (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
