TPG Capital Takes $1.8 Billion Stake in AT&T’s DirecTV business

AT&T to retain 70% stake in video business at value of $16.25 billion.
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AT&T  (T) - Get Report said it has reached a deal to spin out 30% of its DIRECTV unit by forming a new company with TPG Capital, which will pay $1.8 billion for its stake in the satellite TV video business.

AT&T said it will retain a 70% stake in the new company, which will be called DIRECTV and will also include the AT&T TV and U-Verse video services.

The telecom will ultimately receive $7.8 billion in the deal, which is expected to close in the second half of 2021. The newly established company has obtained $6.2 billion in financing and $5.8 billion of that will go to AT&T along with the $1.8 billion from TPG. The new entity will also assume $200 million of existing DIRECTV debt currently held by AT&T.

The transaction implies an enterprise value for the new company of $16.25 billion, AT&T said. AT&T bought then-public DirectTV in 2015 for about $66 billion, including about $17 billion in assumed debt.

"As the pay-TV industry continues to evolve, forming a new entity with TPG to operate the U.S. video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability,” said AT&T CEO John Stankey in a statement. “TPG is the right partner for this transaction and creating a new entity is the right way to structure and manage the video business for optimum value creation," he added.

Shares of AT&T edged up 13 cents, or 0.5%, to $28.76 in after-hours trading on Thursday.