AT&T and private equity firm TPG Capital said Thursday afternoon they will form a new company called DIRECTV to house AT&T’s U.S. video operations, including the DirecTV satellite video operation, the AT&T TV unit, and the U-verse operation.
The new company will be 70% owned by AT&T and will have two representatives on its board of directors from each of AT&T and TPG, and a fifth member, the CEO of the new company, Bill Morrow, who currently runs the U.S. video operations.
AT&T will be paid $7.8 billion for the deal, including $7.6 billion in cash and $200 million worth of assumption of existing debt.
TPG will contribute $1.8 billion in return for its 30% stake and preferred stock in the new company.
The deal is expected to close in the second half of this year. AT&T said it will use the cash proceeds from the transaction to pay down its debt, and said it “does not expect a material impact to its 2021 financial guidance.”
AT&T CEO John Stankey remarked that the deal “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, fiber and HBO Max.”
Added Stankey, “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 monetize non-core assets.”
TPG partner David Trujillo remarked that “video remains a core service for tens of millions of households,” adding, “As video consumption habits evolve, the new DIRECTV will continue investing in its offering to provide value to its customers, including through next-generation streaming pay-TV services.”
Added Trujillo, “TPG looks forward to partnering with AT&T and new DIRECTV leadership to bring the right focus, attention and execution in support of new DIRECTV’s position as a competitive video provider for the benefit of its customers and employees.”