A new standalone company with a familiar name – DIRECTV – has been formed by AT&T Inc. and TPG Capital. The previously announced deal closed yesterday.
TPG Capital is the private equity arm of the global alternative asset firm TPG. The new DIRECTV will own and operate three services – DIRECTV, AT&T TV and U-verse – that were previously owned and operated by AT&T. At the end of the second quarter of 2021, DIRECTV had about 15.4 million premium video subscribers. The streaming version of AT&T TV will be rebranded as DIRECTV stream.
The AT&T TPG deal called for AT&T to get preferred units and a 70% interest in the common units of DIRECTV and to contribute its video business unit to the new company. TPG contributed about $1.8 billion in cash to DIRECTV and got preferred units and a 30% interest in common units of the new entity. The DIRECTV board will include DIRECTV CEO Bill Morrow. Voting members will include Steve McGaw and Thaddeus Arroyo, appointed by AT&T and David Trujillo and John Flynn, appointed by TPG.
At closing, AT&T received $7.1 billion in cash — $7.6 billion net of about approximately $470 million cash on hand. It transferred about $195 million of video business debt. AT&T said that it expects that the transaction will help its debt reduction efforts and enable it to achieve a net debt-to-adjusted EBITDA of below 2.5x by the end of 2023.
The AT&T TPG Capital transaction did not include WarnerMedia’s HBO Max streaming platform and regional sports networks. They are part of the pending WarnerMedia-Discovery transaction. It also didn’t include Vrio, which is AT&T’s Latin American video operations that is being sold to Grupo Werthein; U-verse network assets; or AT&T’s Sky Mexico investment. The new entity will continue to offer HBO Max to subscribers along with any bundled wireless or broadband services and associated customer discounts.
The intention to form the new company was announced in February. At the time, AT&T CEO John Stankey said that finding the assets a new home was “the best way to move forward in the current market.”