Media industry mergers and acquisitions on the rise

AT&T announced a merger on May 19 that may change the way that Minnesota consumers pay for television and Internet connections. It formally agreed to buy DirectTV, the country’s largest satellite television operator, for approximately $48 billion.

ATT will pay $95 a share in stock and cash, approximately 10 percent above DirectTV’s closing stock price on May 16. This price is almost 30 percent higher than where these shares were trading before information of a transaction first went public. With the assumption of DirecTV’s debt, the deal is valued at $67.1 billion. AT&T intends to pay for the purchase with cash on hand, debt and the sale of assets.

AT&T seeks to strengthen its competitive position against Comcast and to create a bigger national carrier as it adapts to shifts in broadband video access. AT&T may also free up capacity on its existing broadband network. It will grow from having a relatively minor position in this market into the second-biggest provider behind Comcast.

AT&T has made video services a priority. It will acquire DirecTV’s offerings such as the National football League’s Sunday Ticket and the satellite television company’s ownership of minority stakes in the Game Show Network, LB Network and the Sundance Channel

It is anticipated that the transaction will face less regulatory compliance hurdles from the federal government. Regulators may look favorably upon a merger that counters a strengthened Comcast, which is also seeking to purchase Time Warner Cable for $45 billion. Federal regulators seek greater competition between wireless and wired communications. However, several investment bankers believe that this deal may complicate approval for its cable television merger.

This business expansion along with other mergers and acquisitions and business deals require legal and technical expertise for success. Their outcome impacts consumers, stockholders and employees and can have repercussions across the economy.

Source: The New York Times, “AT&T to buy DirecTV for $48.5 billion in move to expand clout,” Michael J. De La Merced and David Gelles, May 18, 2014

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