AT&T to Acquire DirecTV (DTV) in $50B Deal

Shares of DirecTV (DTV) were trading up +4.28 or +4.91 percent to $91.44 per share in pre-market trading on Tuesday, after sources revealed yesterday that the two companies were working towards a formal announcement. The takeover is said to be for a minimum of $50 billion and would make AT&T (T) the nationâ s largest satellite television provider and the second largest wireless carrier.

DirecTV shares closed at $87.16, down -0.85 or -0.97 percent in Mondayâ s regular trading session.
El Segundo, California based DirecTV was originally founded as Hughes Electronics Corporation in 1985 and began operations under the DirecTV name in 1990. The company is the nationâ s largest provider of direct broadcast satellite service, beaming satellite television and audio to more than 36 million subscribers in the United States and Latin America. Dallas, Texas based AT&T Inc. is the second largest provider of mobile telephone services and the largest provider of stationary telephone service in the United States. AT&T is also a major provider of broadband subscription television services and the 20th largest provider of mobile telecom services in the world with more than 250 million customers globally. According to sources which remained unnamed due to the information still being private, DirecTV would continue to run as a unit of AT&T, with current DirecTV Chief Executive Officer Mike White possibly running the unit. White is said to be planning to retire after 2015. At $100 per DirecTV share, the deal would be for around $50 billion, however some analysts are estimating the deal could go through for as much as $105 per share. Other people close to the matter say the two parties are currently negotiating in the $92 to $94 per share range. Sources said the two companies are planning for a possible 12-month process to gain regulatory approval. The industry consolidation was initiated by the Comcast (CMCSA) takeover of Time Warner Cable TWC earlier this year, which has yet to gain regulatory approval. The two mega mergers would redefine the industry. A formal announcement is not expected for at least a week with some people saying it could be two weeks. Even if a deal is reached, the possibility of anti-trust issues preventing regulatory approval could still prevent the acquisition from taking place. DirecTV was blocked by regulators from merging with Dish Network (DISH) over ten years ago, while AT&T had a similar situation more recently with T-Mobile. Another hurdle to the takeover is the conflict created by AT&Tâ s eight percent stake in America Movil SAB (AMX), which competes directly with DirecTV in Colombia and Brazil. Also, DirecTV owns a stake in Sky Mexico owned by Grupo Televisa, which directly competes with America Movil in Mexico. With DirecTV stock already trading over $90 per share in early trading this morning, and with as much as two weeks to wait on a formal announcement, the stock could see considerable volatility. Even if a deal is announced, the regulatory hurdles could impede the companies from merging. DirecTV stock is already significantly higher this year; nevertheless, the possibilities for the stock continue to be positive, with $100 per share clearly possible in the near term. Other News About DirecTV DIRECTVâ s New Wireless Genie Mini Now Available Nationwide People can now connect multiple devices without wires or boxes. DirecTV Tops Profit Estimates on Latin America Gains Earnings of $1.63 per share topped estimates of $1.48. Other Stocks in the News Google Faces Demand as EU Court Backs Right to Be Forgotten Google may be forced to remove personal information from its EU websites. UK minister says intervention on AstraZeneca, Pfizer 'tricky' UK Business minister finds takeover using public business rules difficult.

Published on May 13, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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