People walk past an AT&T store in New York.
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AT&T has signed a deal with private equity firm TPG to split off its DirecTV, AT&T TV and U-Verse businesses, according to a SEC filing on Thursday.
Under the agreement, AT&T and TPG will form a new entity called DirectTV, which will own and operate the company’s DirectTV, AT&T TV and U-verse video services. Bill Morrow, CEO of AT & T’s US video unit, was named CEO of the new company.
The transaction implies an enterprise value for the new company of $ 16.25 billion, according to the company. AT&T acquired DirecTV for $ 48.5 billion ($ 67 billion in debt) in 2015 and hoped to link the national pay-TV company to its wireless service to offer customers a discounted bundle. Digital distribution of video has displaced satellite in recent years, causing the value of DirecTV to plummet and AT&T repositioning its strategy around HBO Max, its flagship streaming video service.
Upon closing of the transaction, AT&T will own 70% of the common stock and TPG 30%. The new company will be jointly managed by a board of two representatives from both AT&T and TPG, as well as Morrow, the company said.
The two companies are expected to announce a deal this week, CNBC reported Tuesday. Shares of AT&T rose more than 1% during out-of-hours trading.
Hedge fund Elliott Management took an activist stake in AT&T in September 2019. In a letter to management, Elliott asked AT&T to focus its strategic activities while considering divesting non-core assets, including DirecTV.
DirecTV, U-Verse and AT&T TV Now are based on a linear TV company of broadcast and cable networks that loses millions of subscribers every year.
– CNBC’s Alex Sherman contributed to this report.
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