- Creates Content Distribution Leader
Across Mobile, Video & Broadband Platforms
- The premier pay TV brand with the best
content relationships now poised to deliver video to multiple
screens – mobile, TV, laptops and more – to meet consumers’ future
viewing and programming preferences
- Unparalleled video content distribution
scale in U.S. – nationwide mobile and video networks; broadband to
cover 70 million customer locations with our broadband
expansion
- Latin America’s Leading Pay TV
provider with Significant Growth Potential
- Immediate & Long-Term Financial
Benefits
- Accretive within 12 months after close
on free cash flow per share & adjusted EPS basis
- Cost synergies expected to exceed $1.6
billion annual run rate by year three after closing
- Improves revenue mix – dramatically
increases video revenues, accelerates broadband growth and
significantly expands revenues from outside United States
- Delivers Significant Benefits for
Consumers
- Commitment to expand and enhance
broadband to 15 million customer locations, primarily in rural
areas
- Stronger competitive alternative to
cable, with a better customer experience and enhanced
innovation
- Continued commitment to net
neutrality
AT&T (NYSE:T) and DIRECTV (NASDAQ:DTV) today announced that
they have entered into a definitive agreement under which AT&T
will acquire 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 transaction combines complementary strengths to create a
unique new competitor with unprecedented capabilities in mobility,
video and broadband services.
DIRECTV is the premier pay TV provider in the United States and
Latin America, with a high-quality customer base, the best
selection of programming, the best technology for delivering and
viewing high-quality video on any device and the best customer
satisfaction among major U.S. cable and satellite TV providers.
AT&T has a best-in-class nationwide mobile network and a
high-speed broadband network that will cover 70 million customer
locations with the broadband expansion enabled by this
transaction.
The combined company will be a content distribution leader
across mobile, video and broadband platforms. This distribution
scale will position the company to better meet consumers’ future
viewing and programming preferences, whether traditional pay TV,
on-demand video services like Netflix or Hulu streamed over a
broadband connection (mobile or fixed) or a combination of viewing
preferences on any screen.
The transaction enables the combined company to offer consumers
bundles that include video, high-speed broadband and mobile
services using all of its sales channels -- AT&T’s 2,300 retail
stores and thousands of authorized dealers and agents of both
companies nationwide.
“This is a unique opportunity that will redefine the video
entertainment industry and create a company able to offer new
bundles and deliver content to consumers across multiple screens –
mobile devices, TVs, laptops, cars and even airplanes. At the same
time, it creates immediate and long-term value for our
shareholders,” said Randall Stephenson, AT&T Chairman and CEO.
“DIRECTV is the best option for us because they have the premier
brand in pay TV, the best content relationships, and a fast-growing
Latin American business. DIRECTV is a great fit with AT&T and
together we’ll be able to enhance innovation and provide customers
new competitive choices for what they want in mobile, video and
broadband services. We look forward to welcoming DIRECTV’s talented
people to the AT&T family.”
“This compelling and complementary combination will bring
significant benefits to all consumers, shareholders and DIRECTV
employees,” said Mike White, president and CEO of DIRECTV. “U.S.
consumers will have access to a more competitive bundle;
shareholders will benefit from the enhanced value of the combined
company; and employees will have the advantage of being part
of a stronger, more competitive company, well positioned to meet
the evolving video and broadband needs of the 21st century
marketplace.”
DIRECTV has premier content, particularly live sports
programming. It has the exclusive pay TV rights to NFL SUNDAY
TICKET that provides every out-of-market game, every Sunday
afternoon, on TV, laptops and mobile devices. The new AT&T will
be better positioned to develop unique content offerings for
consumers through, among other initiatives, AT&T’s joint
venture with The Chernin Group. Today, DIRECTV’s content ownership
includes ROOT SPORTS Networks and minority stakes in the Game Show
Network, MLB Network, NHL Network and the Sundance Channel.
DIRECTV will continue to be headquartered in El Segundo,
California, after the deal closes.
Customer Benefits and Commitments, Upon Closing
Together, the companies will be a stronger competitive
alternative to cable for consumers wanting a better bundle of
top-quality broadband, video and mobile services, as well as a
better customer experience and enhanced innovation. Consumers will
also benefit from the combined companies’ additional scale in video
content distribution across its mobile, video and broadband
networks. The combined company will continue to provide the
world-class service and best video and entertainment experience for
which DIRECTV is known.
With the benefits of the transaction, AT&T is able to commit
to do the following, when the deal closes:
- 15 Million
Customer Locations Get More High Speed Broadband
Competition. AT&T will use the merger synergies to
expand its plans to build and enhance high-speed broadband service
to 15 million customer locations, mostly in rural areas where
AT&T does not provide high-speed broadband service today,
utilizing a combination of technologies including fiber to the
premises and fixed wireless local loop capabilities. This new
commitment, to be completed within four years after close, is on
top of the fiber and Project VIP broadband expansion plans AT&T
has already announced. Customers will be able to buy broadband
service stand-alone or as part of a bundle with other AT&T
services.
- Stand-Alone
Broadband. For customers who only want a broadband service
and may choose to consume video through an over-the-top (OTT)
service like Netflix or Hulu, the combined company will offer
stand-alone wireline broadband service at speeds of at least 6 Mbps
(where feasible) in areas where AT&T offers wireline IP
broadband service today at guaranteed prices for three years after
closing.
- Nationwide
Package Pricing on DIRECTV. DIRECTV’s TV service will
continue to be available on a stand-alone basis at nationwide
package prices that are the same for all customers, no matter where
they live, for at least three years after closing.
- Net Neutrality
Commitment. Continued commitment for three years after
closing to the FCC's Open Internet protections established in 2010,
irrespective of whether the FCC re-establishes such protections for
other industry participants following the DC Circuit Court of
Appeals vacating those rules.
- Spectrum
Auction. The transaction does not alter AT&T’s plans to
meaningfully participate in the FCC’s planned spectrum auctions
later this year and in 2015. AT&T intends to bid at least $9
billion in connection with the 2015 incentive auction provided
there is sufficient spectrum available in the auction to provide
AT&T a viable path to at least a 2x10 MHz nationwide spectrum
footprint.
Latin America
DIRECTV’s Latin American business is the leading pay TV provider
in the region and has more than 18 million subscribers, including
all Sky Mexico customers. DIRECTV’s satellite platform’s broad
reach remains advantaged when compared with cable and telco in
Latin America. Latin America has an underpenetrated pay TV market
(about 40% of households subscribe to pay TV) and a growing middle
class, and is DIRECTV’s fastest growing customer segment.
Summary Terms of Transaction
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. The stock portion will be
subject to a collar such that DIRECTV shareholders will receive
1.905 AT&T shares if AT&T stock price is below $34.90 at
closing and 1.724 AT&T shares if AT&T stock price is above
$38.58 at closing. If AT&T stock price at closing is between
$34.90 and $38.58, DIRECTV shareholders will receive a number of
shares between 1.724 and 1.905, equal to $66.50 in value.
This purchase price implies a total equity value of $48.5
billion and a total transaction value of $67.1 billion, including
DIRECTV’s net debt. This transaction implies an adjusted enterprise
value multiple of 7.7 times DIRECTV’s 2014 estimated EBITDA.
Post-transaction, DIRECTV shareholders will own between 14.5%
and 15.8% of AT&T shares on a fully-diluted basis based on
the number of AT&T shares outstanding today.
AT&T intends to finance the cash portion of the transaction
through a combination of cash on hand, sale of non-core assets,
committed financing facilities and opportunistic debt market
transactions.
To facilitate the regulatory approval process in Latin America,
AT&T intends to divest its interest in América Móvil. This
includes 73 million publicly listed L shares and all of its AA
shares. AT&T’s designees to the América Móvil Board of
Directors will tender their resignations immediately to avoid even
the appearance of any conflict.
Transaction Creates Immediate and Long-Term Shareholder
Value
AT&T expects the deal to be accretive on a free cash flow
per share and adjusted EPS basis within the first 12 months after
closing.
The combination provides significant opportunities for operating
efficiencies. AT&T expects cost synergies to exceed $1.6
billion on an annual run rate basis by year three after closing.
The expected synergies are primarily driven by increased scale in
video.
Along with DIRECTV’s current strong cash flows, this transaction
is expected to support future investment in growth opportunities
and shareholder returns.
The combination diversifies AT&T’s revenue mix and provides
numerous growth opportunities as it dramatically increases video
revenues, accelerates broadband growth and significantly expands
revenues from outside the United States. Given the structure of
this transaction, which includes AT&T stock consideration as
part of the deal and the monetization of non-core assets, AT&T
expects to continue to maintain the strongest balance sheet in the
industry following the transaction close.
AT&T’s 2014 guidance for the company remains largely
unchanged. However, the company’s intention is to divest its
interest in América Móvil, which will result in an approximately
$0.05 reduction in EPS, as the América Móvil investment will no
longer be accounted for under the equity method. Adjusted 2014 EPS
growth is now expected to come in at the low-end of the company’s
mid-single digit guidance.
The merger is subject to approval by DIRECTV shareholders and
review by the U.S. Federal Communications Commission, U.S.
Department of Justice, a few U.S. states and some Latin American
countries. The transaction is expected to close within
approximately 12 months.
Conference Call/Webcast
On Monday, May 19, 2014, at 8:30 a.m. ET, AT&T and DIRECTV
will host a webcast presentation to discuss the transaction. Links
to the webcast and accompanying documents will be available on both
AT&T's and DIRECTV's Investor Relations websites.
About AT&T
AT&T Inc. (NYSE:T) is a premier communications holding
company and one of the most honored companies in the world. Its
subsidiaries and affiliates – AT&T operating companies – are
the providers of AT&T services in the United States and
internationally. With a powerful array of network resources that
includes the nation’s most reliable 4G LTE network, AT&T is a
leading provider of wireless, Wi-Fi, high-speed broadband, voice
and cloud-based services. A leader in mobile Internet, AT&T
also offers the best wireless coverage worldwide of any U.S.
carrier, offering the most wireless phones that work in the most
countries. It also offers TV service with the AT&T U-Verse®
brand. The company’s suite of IP-based business communications
services is one of the most advanced in the world. For more
information on AT&T, visit www.att.com
About DIRECTV
DIRECTV (NASDAQ:DTV) is one of the world's leading providers of
digital television entertainment services. Through its subsidiaries
and affiliated companies in the United States, Brazil, Mexico and
other countries in Latin America, DIRECTV provides digital
television service to over 20 million customers in the United
States and more than 18 million customers in Latin America. DIRECTV
sports and entertainment properties include two regional sports
networks (Rocky Mountain and Pittsburgh), and minority ownership
interests in ROOT SPORTS Northwest and Game Show Network. For more
information on DIRECTV, visit www.DIRECTV.com
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this communication, including financial
estimates and statements as to the expected timing, completion and
effects of the proposed merger between AT&T and DIRECTV,
constitute forward-looking statements within the meaning of the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These estimates and statements are subject to risks
and uncertainties, and actual results might differ materially. Such
estimates and statements include, but are not limited to,
statements about the benefits of the merger, including future
financial and operating results, the combined company’s plans,
objectives, expectations and intentions, and other statements that
are not historical facts. Such statements are based upon the
current beliefs and expectations of the management of AT&T and
DIRECTV and are subject to significant risks and uncertainties
outside of our control.
Among the risks and uncertainties that could cause actual
results to differ from those described in the forward-looking
statements are the following: (1) the occurrence of any event,
change or other circumstances that could give rise to the
termination of the merger agreement, (2) the risk that DIRECTV
stockholders may not adopt the merger agreement, (3) the risk that
the necessary regulatory approvals may not be obtained or may be
obtained subject to conditions that are not anticipated, (4) risks
that any of the closing conditions to the proposed merger may not
be satisfied in a timely manner, (5) risks related to disruption of
management time from ongoing business operations due to the
proposed merger, (6) failure to realize the benefits expected from
the proposed merger and (7) the effect of the announcement of the
proposed merger on the ability of DIRECTV and AT&T to retain
customers and retain and hire key personnel and maintain
relationships with their suppliers, and on their operating results
and businesses generally. Discussions of additional risks and
uncertainties are contained in AT&T’s and DIRECTV’s filings
with the Securities and Exchange Commission. Neither AT&T nor
DIRECTV is under any obligation, and each expressly disclaim any
obligation, to update, alter, or otherwise revise any
forward-looking statements, whether written or oral, that may be
made from time to time, whether as a result of new information,
future events, or otherwise. Persons reading this announcement are
cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. This communication may be deemed to be
solicitation material in respect of the proposed merger between
AT&T and DIRECTV. In connection with the proposed merger,
AT&T intends to file a registration statement on Form S-4,
containing a proxy statement/prospectus with the Securities and
Exchange Commission (“SEC”). STOCKHOLDERS OF DIRECTV ARE URGED TO
READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY
STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. Investors and security
holders will be able to obtain copies of the proxy
statement/prospectus as well as other filings containing
information about AT&T and DIRECTV, without charge, at the
SEC’s website, http://www.sec.gov. Copies of documents filed with
the SEC by AT&T will be made available free of charge on
AT&T’s investor relations website. Copies of documents filed
with the SEC by DIRECTV will be made available free of charge on
DIRECTV’s investor relations website.
Participants in Solicitation
AT&T and its directors and executive officers, and DIRECTV
and its directors and executive officers, may be deemed to be
participants in the solicitation of proxies from the holders of
DIRECTV common stock in respect of the proposed merger. Information
about the directors and executive officers of AT&T is set forth
in the proxy statement for AT&T’s 2014 Annual Meeting of
Stockholders, which was filed with the SEC on March 11, 2014.
Information about the directors and executive officers of DIRECTV
is set forth in the proxy statement for DIRECTV’s 2014 Annual
Meeting of Stockholders, which was filed with the SEC on March 20,
2014. Investors may obtain additional information regarding the
interest of such participants by reading the proxy
statement/prospectus regarding the proposed merger when it becomes
available.
AT&TBrad Burns,
214-757-3253brad.burns@att.comorFletcher Cook,
214-912-8541fletcher.cook@att.comorDIRECTVJade Ekstedt,
310-964-3429 (O)jlekstedt@directv.comorRobert Mercer, 310-964-4683
(O)rgmercer@directv.comorKelly Sullivan, 212-355-4449
(O)ksullivan@joelefrank.com
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