Exclusive: Buyout firm TPG leads for stake in AT & T’s DirecTV sources

(Reuters) – Private equity firm TPG has entered into exclusive talks to acquire a minority stake in AT&T Inc’s satellite TV division, DirecTV, in a deal that would allow the U.S. cellular provider to close its net debt of nearly $ 150 billion, people know with the issue said Friday.

The exact price TPG is willing to pay couldn’t be pinpointed, but sources said the deal could value DirecTV at more than $ 15 billion. If negotiations were to be concluded successfully, a deal could be announced in the coming weeks, the sources added, asking for anonymity because the matter is confidential.

AT&T and TPG declined to comment.

AT&T shares rallied nearly 1% on the news to an intraday high of $ 29.05, giving the company a market cap of nearly $ 210 billion. Shares unofficially closed at $ 28.92 on Friday, up 0.3%.

The advanced talks with TPG are the culmination of an auction that AT&T organized for DirecTV for several months. The deal would be a financial blow to AT&T, which valued DirecTV at approximately $ 67 billion including debt when it agreed to acquire it in 2014.

Since then, DirecTV has been bleeding subscribers, with users moving to less expensive online streaming services like Netflix Inc and Amazon.com Inc.’s Prime service.

AT&T has said it lost 590,000 subscribers on its DirecTV, U-verse and AT&T TV platforms in the third quarter. It is under pressure to curtail its growing debt stack as it invests more in 5G and other wireless services.

AT & T’s biggest deal, the 2018 acquisition of media conglomerate Time Warner for $ 85 billion, has soured in the aftermath of the COVID-19 pandemic as a dip in movie attendance weighs on movie revenues.

WarnerMedia, the segment that includes HBO and the company’s film and TV studio, generated revenue of $ 7.5 billion in the third quarter of 2020, down from $ 8.4 billion in the same quarter a year ago.

Thanks to more people seeking home entertainment, AT&T in the United States reported 38 million subscribers in the United States to both its premium TV station HBO and HBO Max during the third quarter, reaching its 2021 target a year earlier.

TPG, which previously invested in companies in the industry such as US regional cable TV operator Astound and Spanish-speaking broadcaster Univision, has approximately $ 85 billion in assets under management, according to its website.