AT&T could tie up $50bn deal with DirecTV
AT&T is looking to snap up DirecTV in a deal which could create a TV megacorporation
AT&T is in active talks to buy satellite TV provider DirecTV and may complete a deal in the next few weeks that could be worth close to $50 billion (30 billion), two people familiar with the matter said on Monday.
The second-largest wireless operator is discussing an offer per share for DirecTV, one of the people said, slightly higher than the company's current closing price of $87 (51).
A bid near $95 (56) per share would value DirecTV at more than $48 billion (28 billion) based on its shares outstanding, and would represent a premium of more than 20 percent to its stock price before news of AT&T's interest first emerged on May 1.
The deal price has yet to be finalized and terms could still change as discussions are continuing. Sources asked not to be named because the matter is not public.
Other details also have yet to be worked out, such as a break-up fee as well as a potential role for DirecTV Chief Executive Officer Mike White, the second person said.
The talks are the latest sign of a rising tide of potential megadeals in the telecoms, cable and satellite TV space, which is being roiled by Comcast's proposed $45 billion (26 billion) takeover of Time Warner Cable as well as market forces such as the rise of Web-based TV and surging mobile Internet usage.
AT&T and DirecTV declined to comment. Bloomberg News earlier reported that AT&T was offering to pay around $100 (59) per share for DirecTV, whose management team will continue to run the company as a unit of AT&T. DirecTV shares rose 6 percent to $92 (54) in extended trading on Monday.
A combination of AT&T and DirecTV would create a pay television giant close in size to where Comcast will be if it completes its pending acquisition of Time Warner Cable. For that reason, the proposed merger is likely to face a prolonged battle to convince regulators to allow further consolidation in pay-TV.
"This is not the first time that AT&T and DirecTV have danced around the fire and thought if they could give it a go," said ReconAnalytics analyst Roger Entner.
"They both looked at each other for at least 10 years. Both kind of came to the conclusion that it was in the right environment. It makes a lot of sense to get together, but there was never the right regulatory environment for it."
A Comcast-Time Warner Cable merger would call for a counterweight like a combined AT&T-DirecTV, Entner said. He added that the merger would make sense for DirecTV given the decline of satellite TV.
"They both see the Grim Reaper at the horizon. DirecTV hasn't gone out and bought spectrum. Dish has, so DirecTV needs to find a partner, and AT&T is that partner," he said.
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