AT&T Inc. (T) Eyeing DIRECTV (DTV) Acquisition for Close to $50 Billion


AT&T Inc. (NYSE:T) is currently in talks with satellite TV provider DIRECTV (NASDAQ:DTV) to buy it and the deal, worth $50 billion may be sealed in a few weeks, according to Reuters quoting sources close to the matter.


DIRECTV (NASDAQ:DTV), the second largest wireless operator is discussing sale offers in at around $90 per share, reports one of the people involved. The company closed at $87.16 per share on Monday, and on Tuesday the stock already has gained over 1.2% in morning trading.

AT&T Inc. (NYSE:T) first expressed its interest on May 1, according to the source. Assuming a bid of $95 per share, DIRECTV (NASDAQ:DTV) could earn well over $48 billion, based on its shares outstanding. It is also likely that it would represent a premium of more than 20% to its stock price. According to Reuters, the sources, who kept their anonymity, also said that the price of the deal is yet to be decided as well as the terms, as the discussions are still continuing. Other details such as break up fee, as well as the future role for DIRECTV (NASDAQ:DTV)’s CEO, Mark White, are yet to be drafted.

These talks come at a time when the world is seeing an increase in potential megadeals, especially in the telecoms, satellite TV space and cables. These are being fuelled by Comcast Corporation (NASDAQ:CMCSA) proposed takeover of Time Warner Cable Inc (NYSE:TWC) for $45 billion.

Bloomberg News earlier reported that AT&T Inc. (NYSE:T) offered to pay as much as $100 per DirecTV share, and that the TV provider’s management team would continue running it as a unit of AT&T.

The Wall Street Journal estimates the deal to get finalized in two weeks. In extended trading, DirecTV (NASDAQ:DTV) shares rose to $92.50 after this revelation. It is working with various advisors, including Goldman Sachs Group Inc (NYSE:GS) to evaluate feasibility of combination following takeover by AT&T Inc. (NYSE:T).

The merger of of AT&T and DirecTV (NASDAQ:DTV) could create a giant conglomerate, as big as the one that will be created when Comcast Corporation’s (NASDAQ:CMCSA) takes over Time Warner Cable Inc (NYSE:TWC). This reason would primarily fuel a battle between the merger and regulators in convincing them to allow further pay TV consolidation. Roger Entner of ReconAnalytics mentions that this is not the first time AT&T Inc. (NYSE:T) and DirecTV  talked about it. But all previous endeavors were unsuccessful. He goes on to say that even though both companies had merger ideas for the last 10 years, after coming to the conclusion that it was the right thing to do, they could not go ahead due to the lack of a right regulatory environment.

Reuters also quoted ReconAnalytics analyst Roger Entner stating that this deal is necessary to counter the Comcast Corporation’s (NASDAQ:CMCSA) – Time Warner Cable Inc (NYSE:TWC) merger. It would also make sense for DirecTV to go ahead with the merger, given the decline of the satellite TV. He said that both Time Warner Cable Inc (NYSE:TWC) and DirecTV did not purchase spectrums, unlike DISH Network Corp(NASDAQ:DISH), and the future seems bleak. So it is only sensible of DirecTV  to merge with AT&T Inc. (NYSE:T).

A few investors speculate of a possible tie up between DirecTV and DISH Network Corp(NASDAQ:DISH), but it never came about. Dish Chairman Charlie Egan states that such a merger would be very beneficial, but they are not going to make any moves at the current prices.