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People walk past an AT&T store in New York City.
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AT&T has reached an agreement with private equity firm TPG to split up its DirecTV, AT&T TV and U-Verse businesses, according to an SEC filing Thursday.
Under the agreement, AT&T and TPG will form a new entity called DirectTV which will own and operate the company’s DirectTV, AT&T TV and U-verse video services. Bill Morrow, CEO of AT&T’s US video unit, has been appointed CEO of the new company.
The transaction involves an enterprise value for the new company of $ 16.25 billion, according to the company. AT&T acquired DirecTV for $ 48.5 billion ($ 67 billion with debt) in 2015 and was hoping to partner the national pay-TV company with its wireless service to offer a discounted package to customers. Digital video distribution has supplanted satellite in recent years, driving down the value of DirecTV and AT&T to reposition its strategy around HBO Max, its flagship streaming video service.
After the transaction closes, AT&T will own 70% of the common shares and TPG will own 30%. The new company will be jointly governed by a board of directors consisting of two representatives from AT&T and TPG, as well as Morrow, the company said.
The two companies were due to announce a deal as early as this week, CNBC reported Tuesday. AT & T’s stock rose more than 1% after hours.
The hedge fund Elliott Management took an activist stake in AT&T in September 2019. In a letter to management, Elliott asked AT&T to focus its strategic operations while considering divesting non-core assets – including DirecTV.
DirecTV, U-Verse, and AT&T TV Now are based on a broadcast and cable network linear television business that loses millions of subscribers each year.
– CNBC’s Alex Sherman contributed to this report.
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