DirecTV acquires EchoStar’s video business
September 30, 2024
As heavily rumoured, DirecTV and EchoStar have entered into a definitive agreement under which DIRECTV will acquire EchoStar’s video distribution business DISH DBS, including DISH TV and Sling TV, through a debt exchange transaction.
“DirecTV operates in a highly competitive video distribution industry,” said Bill Morrow, Chief Executive Officer, DirecTV. “With greater scale, we expect a combined DirecTV and DISH will be better able to work with programmers to realise our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers’ interests, and to be better positioned to realise operating efficiencies while creating value for customers through additional investment.”
“This agreement is in the best interests of EchoStar’s customers, shareholders, bondholders, employees, and partners,” said Hamid Akhavan, President and Chief Executive Officer, EchoStar. “With an improved financial profile, we will be better positioned to continue enhancing and deploying our nationwide 5G Open RAN wireless network. This will provide US wireless consumers with more choices and help to drive innovation at a faster pace. We expect DISH and EchoStar bondholders to benefit from two companies with stronger financial profiles and more sustainable capital structures.”
“DirecTV was founded 30 years ago to give consumers greater choices than incumbent cable companies for video content, and the company’s acquisition of DISH TV and Sling TV positions it to again provide more choices and better value in an industry currently dominated by large streaming platforms,” added David Trujillo and John Flynn, Partners at TPG. “Our ability to execute these transactions, alongside our proposed acquisition of AT&T’s 70 per cent stake in DirecTV announced earlier today, exemplifies the unique capabilities of the TPG platform and our experienced sector-focused investment approach as we support DirecTV’s continued investment in innovating the next generation of video services that benefit consumers.”
Upon transaction close, DirecTV expects to have a leverage position just over 2.0x, and plans to reduce to under 2.0x within 12 months, consistent with its stated 1.5x – 2.0x financial policy on a pro forma basis. As a result, DirecTV will have one of the best leverage profiles in the pay TV industry. DirecTV estimates that the combination of DirecTV and DISH has the potential to generate cost synergies of at least $1 billion per annum. These synergies are expected to be achieved by the third anniversary of closing, assuming the closing is in late 2025.
At close, EchoStar will have reduced its total consolidated debt (excluding financing leases and other notes payable) by approximately $11.7 billion and reduced its consolidated refinancing needs through 2026 by approximately $6.7 billion (excluding financing leases and other notes payable). The transaction, in conjunction with the exchange offer, will also result in the termination of all Intercompany Obligations between DISH Network and DISH DBS and creates the ability for EchoStar to fully unencumber the 3.45-3.55 GHz spectrum, unlocking strategic and operating flexibility.
Under the terms of the purchase agreement, DirecTV will acquire EchoStar’s video distribution business in exchange for a nominal consideration of $1 plus the assumption of DISH DBS net debt. DISH Network will also benefit from the releases of a substantial amount of intercompany receivables, including spectrum, but will have contractually limited access to the cash flow generated by its business between signing and closing. DISH DBS and DirecTV have commenced the Exchange Offer for five different series of DISH DBS notes with a total face value of approximately $9.75 billion, including seeking certain consents from the holders of such notes to facilitate the acquisition.
The transaction is subject to various closing conditions, including, but not limited to, a requisite amount of the outstanding DISH DBS notes being tendered into the Exchange Offer, completion of a pre-closing reorganisation, and receipt of required regulatory approvals.
In addition, TPG Angelo Gordon and certain of its Co-Investors, as well as DirecTV, provided $2.5 billion of financing to fully refinance DISH DBS’ November 2024 debt maturity. The proceeds of the funding will be distributed to DISH DBS via a secured intercompany loan to fully repay DISH DBS’ November 2024 debt maturity and for general corporate purposes. The financing can be exchanged or refinanced into DirecTV debt at the closing of the acquisition.
“We built our business to provide bespoke financing solutions. We are pleased to partner with DirecTV and DISH DBS on a transaction that is value-enhancing for all stakeholders,” said Ryan Mollett, Partner, and Michael Ginnings, Managing Director, TPG Angelo Gordon.
Upon closing of this transaction, DirecTV will continue to be led by Morrow, DirecTV’s Chief Executive Officer, and Ray Carpenter, DirecTV’s Chief Financial Officer. The combined company will be headquartered in El Segundo, California.
TPG has also announced a definitive agreement under which TPG will acquire from AT&T the remaining 70 per cent stake in DirecTV that it does not already own. TPG will invest in DirecTV through TPG Capital, the firm’s US and European private equity platform. The transaction between TPG and AT&T is expected to close in the second half of 2025, subject to customary closing conditions. Completion of this transaction is not contingent on DirecTV’s acquisition of DISH.