Boston, MA 05/23/2014 (wallstreetpr) – AT&T Inc. (NYSE:T) will acquire DIRECTV (NASDAQ:DTV) for $95 per share based on Friday closing price of AT&T. The transaction intends to become a content distribution leader with unprecedented capabilities in broadband, video and mobile services.
The Deal Transaction
As per the term, shareholders of DIRECTV (NASDAQ:DTV) will receive $95.00 per share including $28.50 cash per share and $66.50 per share in AT&T stock. Even, the stock portion will subject to a range based on AT&T’s closing price – shareholders of DIRECTV will receive shares at a range of 1.724 – 1.905 if the AT&T stock trading at price between $34.90 and $38.58.
So, the transaction involves multiples of 7.7x 2014E EBITDA of DIRECTV, which includes $48.5 billion equity value of and $67.1 billion transaction value (including DIRECTV’s net debt). DIRECTV (NASDAQ:DTV)’s shareholders will own 14.5%-15.8% of AT&T shares after the transaction.
AT&T Inc. (NYSE:T) plans to fund the transaction primarily the cash part through a combination of available cash, external borrowings and sale of non-core assets and continues to maintain its balance sheet following the transaction. The merger expects to close within 12 months based on regulatory approvals from both the parties.
Operational Advantage
The Combination will diversify the source of revenue by accessing larger customer base spread across broadband, mobile and video and become a stronger alternative to cable. It will increase the distribution scale and expand its broadband coverage and improve its services.
In addition, the combined company will provide integrated mobile video delivery platform for customers and create significant growth opportunities in pay TV services and also increase its presence in Latin America.
Financial Benefit
The combination will increase the operating efficiencies of AT&T Inc. (NYSE:T) that will be accretive to free cash flow and adjusted EPS within 12 months of transaction. In addition, DIRECTV (NASDAQ:DTV)’s current strong cash flows will support investments for future growth opportunities to increase from video, broadband and entertainment.
