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Berkshire Lieutenants Poised For Role in DirecTV Takeover

NEW YORK (TheStreet) - John Malone signaled Dish Network (DISH - Get Report) should merge with DirecTV (DTV) in 2013. Meanwhile, Berkshire Hathaway's (BRK.A) rising investing stars Ted Weschler and Todd Combs are speculated to be the brains behind the company's over $3 billion stake in DirecTV.

Now, those investors could be forced to either support or contest DirecTV's takeover. On Monday evening, the Wall Street Journal and Bloomberg reported AT&T (T - Get Report) will offer a deal for DirecTV, in a takeover deal that would value the company at around $48 billion at the high-end.

Such a move would effectively bolster AT&T's TV presence and help the company expand its wireless service as data usage and network demands continue to rise. Amid an ever-faster pace of consolidation in the telecom, broadband and wireless industry, DirecTV has emerged as one of the prized targets.

Unlike other consolidators in the wireless and telecom sector, DirecTV doesn't have many large hedge fund shareholders who are willing to pick battles with management or an acquirer. Instead, DirecTV has Berkshire as a 7.25% shareholder with a stake worth about $3.2 billion as of Monday's close.

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For Berkshire, the deal may be a slightly unfamiliar role. Most of the company's biggest investments such as Wells Fargo (WFC), Coca-Cola (KO), IBM (IBM) and American Express (AXP) are simply beyond the reach of acquirers. The company, itself, also does a fair amount of M&A.

Malone, however, may take a more vocal role. He's had a much longer and active investment in DirecTV and once owned nearly 25% of the company's outstanding shares. As Bloomberg reported, Malone said just under a year ago, DirecTV should combine forces with Charlie Ergen.

"It would be good if DirecTV could combine with Echo or Dish or whatever Charlie calls it now just because scale economics in the media business drives down costs and makes it possible for larger investment," Malone told Bloomberg at the 2013 Allen & Co. conference in Sun Valley.

Now, it appears AT&T has the inside track. Let's see whether Dish will enter the fray.

Earlier in May, Dish's Ergen said he wouldn't be bullied by AT&T into a deal. If an offer does emerge, let's see if that remains the case or if Ergen strikes out once more for the large deal that may make use of the billions in wireless spectrum he's acquired.

In the meantime, expect Berkshire and Malone to have a say if DirecTV's takeover turns to a hostile effort or a horse race between Ergen and AT&T.

DirecTV shares rose over 6% to $92.50 in late Monday trading on reports of the AT&T deal.

Berkshire Hathaway and DirecTV have not yet responded to TheStreet's request for comment on this story. AT&T declined to comment.

-- Written by Antoine Gara in New York.

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