Summary
AT&T Inc. (T) announced the closing of its agreement to contribute its U.S. video business (DIRECTV, AT&T TV, and U-verse services) to a new entity, New DTV. This transaction involves TPG VIII Merlin Investment Holdings, L.P. ("Investor") contributing approximately $1.8 billion in cash for a 30% stake in New DTV. AT&T retains a 70% stake, receiving $4.25 billion in junior preferred interests and $4.2 billion in common catch-up interests, along with approximately $7.1 billion in cash (net of cash on hand at New DTV) and transferring $195 million of debt related to the video business. This strategic move effectively separates AT&T's traditional pay-TV operations into a new structure with a significant minority partner. Investors should note AT&T's agreement to cover net losses on the NFL Sunday Ticket contract up to a cap of $2.1 billion over the remaining contract period. The New DTV Operating Agreement outlines a specific distribution waterfall prioritizing Investor's return before AT&T's preferred and catch-up interests, and it establishes a joint governance structure with a four-member board plus the CEO.
Key Highlights
- 1AT&T has successfully closed the transaction contributing its U.S. video business (DIRECTV, AT&T TV, U-verse) to a new entity, New DTV.
- 2TPG VIII Merlin Investment Holdings, L.P. invested approximately $1.8 billion for a 30% stake in New DTV.
- 3AT&T retains a 70% stake in New DTV and received approximately $7.1 billion in cash as part of the deal.
- 4AT&T agreed to cover up to $2.1 billion in net losses for the NFL Sunday Ticket contract over its remaining term.
- 5The New DTV Operating Agreement details a priority distribution waterfall, with the Investor's capital return and preferred return being prioritized.
- 6New DTV will have a jointly governed board, with two managers appointed by AT&T, two by the Investor, and the CEO.
- 7The transaction effectively creates a more distinct operating and financial structure for AT&T's video services business.