By Drew FitzGerald 

AT&T Inc. agreed to join its pay-TV unit with private-equity firm TPG in a deal that would form a new business valued around $16.25 billion, including debt, pulling the telecom giant back from a costly wager on entertainment.

The transaction would move the DirecTV and AT&T TV services in the U.S. into a new entity to be jointly run by the telecom company and the private-equity firm. AT&T will retain a 70% stake in the business. TPG will pay $1.8 billion cash for a 30% stake.

The deal values the business well below the $49 billion -- about $66 billion including debt -- that the Dallas company paid to buy international satellite operator DirecTV in 2015. AT&T recently struck $15.5 billion off the value of the unit, reflecting the service's dimmer prospects.

Bidders including TPG and its rival Apollo Global Management Inc. had been jockeying for the business since The Wall Street Journal first reported on the sale process in August.

AT&T bought DirecTV near the peak of the pay-TV market, before cord-cutting upended the sector. Netflix Inc. had about 75 million subscribers world-wide, far below the more than 200 million subscribers it serves today. Cheap channel bundles costing $30 a month or less hadn't yet pierced the market.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

 

(END) Dow Jones Newswires

February 25, 2021 16:54 ET (21:54 GMT)

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