DIRECTV and AT&T Agree to Combine
Telecom giant AT&T and aggressive portfolio choice The DIRECTV Group (NASDAQ: DTV – $86.18) announced they have entered into a definitive agreement under which AT&T will acquire satellite provider DIRECTV in a stock-and-cash transaction for $95 per share based on AT&T’s Friday closing price. The agreement has been approved unanimously by the Boards of Directors of both companies. The acquisition has been rumored for the past few weeks sending shares of DTV close to the agreed upon take-out price. DIRECTV shareholders will receive $95.00 per share under the terms of the merger, comprised of $28.50 per share in cash and $66.50 per share in AT&T stock. If AT&T’s stock price at the time of closing is between $34.90 and $38.58, DIRECTV shareholders will receive a number of shares between 1.724 and 1.905 of AT&T, equal to $66.50 in value. This purchase price implies a total equity value of $48.5 billion and a total transaction value of about $67.1 billion, including DIRECTV’s net debt. DIRECTV has agreed to pay a $1.4 billion breakup fee to AT&T in the event that it pursues another transaction with a higher bidder, which I believe is unlikely. No penalties appear to have been written into the agreement if AT&T backs out or if the combination fails due to a regulatory veto.