How the NFL Could Kill DIRECTV-AT&T Merger

Updated from 10:08 a.m. to include more details about the DIRECTV/SUNDAY TICKET deal.

NEW YORK (TheStreet) -- The proposed $49 billion big merger between AT&T (T) and DIRECTV (DTV) is not about subscribers, free cash flow, dividend coverage or any other story you may read this morning. It's about football. More specifically, it's about the National Football League, which has become a television ratings powerhouse under Commissioner Roger Goodell.

Embedded in the 8-k filing is the fact that NFL Sunday Ticket, which has been on DIRECTV for years, could potentially kill the merger, should a deal not be consummated between the NFL and DIRECTV:

The parties also have agreed that in the event that DIRECTV's agreement for the "NFL Sunday Ticket" service is not renewed substantially on the terms discussed between the parties, the Company may elect not to consummate the Merger, but the Company will not have a damages claim arising out of such failure so long as DIRECTV used its reasonable best efforts to obtain such renewal. The obligation of each party to consummate the Merger is also conditioned upon the other party's representations and warranties being true and correct (subject to certain materiality exceptions), the other party having performed in all material respects its obligations under the Merger Agreement, receipt of certain tax opinions and the other party having not suffered a material adverse effect (as described in the Merger Agreement).

Giving the NFL such power is unusual in a merger more about video subscribers than anything else, but Hudson Square Research analyst Daniel Ernst notes DIRECTV is in talks to renew the deal, despite the NFL going around and shopping the package to other providers.

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