As widely rumored, AT&T has formally announced their intention to purchase DirecTV for $95/share.
This purchase price implies a total equity value of $48.5 billion and a total transaction value of $67.1 billion, including DIRECTV’s net debt.
While this transaction, should it be approved, would result in one of the largest pay television providers, I see it largely as a defensive maneuver on AT&T’s part in an industry where they should be on the offensive with more forward thinking plays as linear television looks to contract. Further, it’ll be interesting to see how DirecTV’s negotiations with the NFL evolve given new ownership, with deeper pockets and potentially broader distribution potential … and if they are granted exclusive rights.
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According to CNBC this morning, who cited the 8K filing by AT&T, the NFL deal is a major component of this transaction. Should DirecTV not renew NFL:ST, AT&T can walk away from the deal without penalty.
NFL's bargaining position just got a whole lot stronger. I pasted the relevant 8k excerpt below. Wonder if "substantially" and "terms discussed" include exclusivity of some sort?
The parties also have agreed that in the event that DIRECTV’s agreement for the “NFL Sunday Ticket” service is not renewed substantially on the terms discussed between the parties, the Company may elect not to consummate the Merger, but the Company will not have a damages claim arising out of such failure so long as DIRECTV used its reasonable best efforts to obtain such renewal.
There's so many moving parts, it's going to be interesting to see how it works out. Legally, DirecTV has to operate as if the merger isn't happening, AT&T cannot be involved in the NFL negotiations at all, and DirecTV can't count on their money. The NFL will of course know this so they can't necessarily put the screws to DirecTV (though it does bump the price up a bit I'm sure)
Also, I wonder how the NFL's deal with Verizon will factor into it. It will be very awkward for Verizon to be the "official wireless partner" of the NFL, with all the apps and whatnot, and then all of a sudden AT&T owns the rights to the premier content agreement for the League.