People pass by an AT&T store in New York.
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AT&T has struck a deal with private equity firm TPG to divest its assets from DirecTV, AT&T TV and U-Verse, according to an SEC filing on Thursday.
Under the agreement, AT&T and TPG will form a new entity called DirectTV that will own and operate the company’s DirectTV, AT&T TV and U-verse video services. Bill Morrow, CEO of the US AT&T video unit, has been named CEO of the new company.
The transaction involves a value of the enterprise for the new company of 16.25 billion dollars, according to the company. AT&T acquired DirecTV for $ 48.5 billion ($ 67 billion in debt) in 2015 and hopes to associate the national pay-TV company with its wireless service to offer customers a discount package. Digital video distribution has replaced satellite in recent years, causing DirecTV to decline, and AT&T has repositioned its strategy around HBO Max, its streaming video tape service.
Upon completion of the transaction, AT&T will hold 70% of the equity and TPG will hold 30%. The new company will be jointly governed by a board with two representatives from each of AT&T and TPG, as well as Morrow, the company said.
The two companies were expected to announce an agreement immediately this week, CNBC reported on Tuesday. AT&T shares rose more than 1% in trading after the program.
The Elliott Management Hedge took over an activist stake in AT&T in September 2019. In a letter to management, Elliott urged AT&T to focus its strategic operations, also considering divesting noncore assets – including DirecTV.
DirecTV, U-Verse and AT&T TV Now are based on a linear TV and cable network business, which loses millions of subscribers every year.
– CNBC’s Alex Sherman contributed to this report.
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