MUMBAI: This is clearly a sign of the times: the impact that streaming is having on consumption of video by viewers at home. American DTH operators DirecTV and EchoStar today announced that they have entered into a definitive agreement under which the former will acquire the latter’s video distribution business Dish DBS, including DishTV and Sling TV through a debt exchange transaction.
A release issued by the companies stated that the acquisition will benefit US video consumers by creating a more robust competitive force in a video industry dominated by streaming services owned by large tech companies and programmers. The transaction will provide consumers with compelling video options while separately improving EchoStar’s financial profile as it continues to enhance and further deploy its nationwide 5G Open RAN wireless network.
“DirecTV operates in a highly competitive video distribution industry,” said DirecTV CEO Bill Morrow. “With greater scale, we expect a combined DirectTV and Dish will be better able to work with programmers to realize 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 realize 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 EchoStar president & CEO Hamid Akhavan. “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 its 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,” said TPG partners David Trujillo and John Flynn. “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.”
Compelling Transaction Benefits
A combination of DIRECTV and DISH will help the new company provide consumers with more choices and better value. The combined video company is expected to:
* Have increased scale to incentivise programmers to allow DirecTV to deliver smaller packages at lower price points.
* Be better positioned to bring together multiple content sources in one easily accessible place.
* Have an enhanced ability to make the investments required to improve its streaming services.
* Improve the viability of the satellite platform by realizing efficiencies of some shared fixed infrastructure and operating expenses.
* Continue to provide the broadest array of programming and diverse voices available on pay TV, including local news.
The transaction will also benefit US wireless consumers by allowing EchoStar to focus on enhancing and further deploying its 5G Open RAN cloud-native wireless network. This transaction will:
* Alleviate a material portion of EchoStar’s financial constraints.
* Free up operational and financial resources that EchoStar can dedicate to its mission of deploying a nationwide facilities-based wireless service to compete with dominant incumbent wireless carriers.
* Benefit consumers by enabling EchoStar (through its Boost Mobile brand) to strengthen its position as the fourth facilities-based carrier in the U.S.
* Enable EchoStar to further leverage its satellite assets and experience, including developing innovative direct-to-device (D2D) solutions.
Highly Competitive Industry
The video distribution industry has undergone a massive transformation and is highly competitive, now dominated by streaming services owned by large tech companies and programmers.
* Streaming services owned by large tech companies and programmers now have subscription numbers that far exceed those of pay TV distributors.
* Content that was historically the mainstay of traditional pay TV – news, sports, and entertainment – is now available exclusively or first-run on direct-to-consumer streaming services.
* The vast majority of consumers who leave satellite video are “cutting the cord” for streaming services – wherever they live.
* Combined, DirecTV and Dish have collectively lost 63 per cent of their satellite customers since 2016.
* Traditional pay TV penetration in US households is now less than 50 per cent
Improve Both Companies’ Financial Profiles
The transaction is expected to strengthen the financial profiles of DirecTV and EchoStar, creating opportunities for additional investment.
* 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.
* The transaction will provide EchoStar with greater financial flexibility by improving its access to capital and reducing overall refinancing needs.
* 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 announced today (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 incremental strategic and operating flexibility.
Transaction Details
Under the terms of the purchase agreement, DirecTV will acquire EchoStar’s video distribution business, including DishTV and Sling TV, 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 indentures governing the new DishH DBS notes will provide for an amendment without the consent of holders of the new Dish DBS notes to allow for the mandatory exchange of such notes following receipt of certain regulatory approvals and provided the acquisition has been or will be consummated before the outside date described in the purchase agreement, into a reduced principal amount of DirecTV debt which will have terms and collateral that mirror its existing secured debt. Such mandatory exchange is conditioned, amongst other things, on an aggregate reduction in the principal amount of Dish DBS’ notes in such exchange of at least $1.568 billion. If noteholders do not accept the exchange offer on terms satisfactory to DirecTV, including to the extent the above mentioned minimum principal reduction is not achieved, it has the right to terminate the acquisition without closing.
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 reorganization, 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 TPG Angelo Gordon partner Ryan Mollett and managing director Michael Ginnings.
Upon closing of this transaction, DirecTV will be led by a proven management team that reflects the strengths and capabilities of both organizations. DirecTV will continue to be led by CEO Bill Morrow, and CFO Ray Carpenter. The combined company will be headquartered in El Segundo, California.
TPG Inc. to Acquire AT&T’s 70 per cent Stake in DirecTV
TPG and AT&T today 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.
