AT&T gets bids valuing DirecTV over $15B including debt - WSJ

• AT&T (NYSE:T) has received bids for its DirecTV unit valuing it at more than $15B including debt, The Wall Street Journal reports, as the process moves into the late stages.
• That means there could be a deal completed by early in 2021.
• AT&T shares are up 3% to a session high.
• Among those offering bids over the $15B mark was Michael Klein's blank-check firm Churchill Capital Corp. IV (CCIV +0.4%), according to the report.
• Meanwhile, Apollo Global Management (APO -0.8%), linked to the discussions for some time, has submitted a bid valuing DirecTV under $15B, the WSJ says.
• Churchill Capital IV, which raised $2.07B in July, was linked to the DirecTV talks in November with an eye to a deal around $15B.
• The price is still a fraction of what AT&T paid for the assets five years ago: about $48.5B, or $67.1B including debt.

Comments

[deadhead213]

T needs to spin-off to shareholders Direct TV, HBO+ into one. Sadly, they sold Crunchyroll that should have been included as well.

[Chip Chipperson]

DirectTV is just an awful product. The service is intolerable and the prices are outrageous. Any group that picks this up is begging for failure. CIIV and APO competing for this? RUN!

[RoyalAce]

@dreibsom I don't know what you consider "intolerable" service about DTV but I'm approaching 20 years as a subscriber and have always been super pleased with the service. It's true however that its price and rate increases have become outrageous and pleased as I am with the service I am contemplating alternatives.

BTW, my neighbors with cable have similar complaints and straming has its critics also.

[ALLDAY1]

@RoyalAce I had DTV for 10years which included Sunday ticket and decided that the cost started becoming prohibitive so I switched to DISH, falling for spectacular incentives and a lower price but no Sunday ticket.

DISH is absolutely HORRIBLE. While I had a 2 year commitment and almost 1 year is, their recent issue whit several fox stations with their carriage commitments of 3 weeks meant that no FOX tv in my area and thus not football games for 3 weeks yet there was no price decrease in the cost for that 1 month period, we of course heard the sob story of why and it had to do with cost, and their negotiations with the supplier of the channel provider, but is NOT MY PROBLEM since I contracted for the designated channels and did not get them. I ow have DTV again shopping their service and will consider them again as well as the streaming services..

DISH will not be considered ever again.

Allday

[RoyalAce]

@ALLDAY1My son and his wife recently ditched DISH after 15 years and went to YouTube streaming but kept DISH for a local package at only $18/ mo. That plus $75 for You Tube is quite a savings but still there are aleays tradeoffs.

DTV just gave me $20/month off for 12 months w/ no commitment. Still expensive though and definitely will not absorb another increase.

[valrisk]

Direct TV was a bigger than average mistake for a communication/technology company. It is painful but let it go and concentrate on current technology. 5G, More fiber, edge computing, small cell and streaming entertainment. T is in need of more speed on combining the purchases but I believe this will be a great stock for years,

Long T with a long term outlook. Enjoy the dividend and the products.

[zerosum2]

Randall Stephenson shall be put into prison for life for his reckless acquisitions, until he comes up money to make up the losses.

[ALLDAY1]

Allday

@zerosum2 This is not a SOCIALIST COUNTRY YET!!!! He broke no laws, regardless of how you feel.

[richjoy403]

@ALLDAY1 -- Correct. I never fail to be surprised at the multitudes here who post their emotional dribble.

If they also manage their portfolios emotionally...they will soon learn to their portfolios over to professional management.

[polyhedral]

@richjoy403 remember that there are people on BOTH ends of a trade. The illiterate and emotional have their place in life.

[goldenko91]

They need to sell to have more cash for spectrum. Competition is growing.

Still shocking to see such a low number though. Could have bought Netflix for a similar valuation as Directv back in 2015.

Onward and hopefully upward

[Lance kaminsky]

Sell it and someone will run directv to the ground.

[d0d0ramefasolated0]

See Randall was the absolute anti fiduciary. He could have lost less on Dish. Dish was always better anyway.

[jimoc]

t haters won't like that or the pps now.

[ElPablo224]

@jimoc T is down 20% YTD

Bulls can justify any thing tho right...

[Flamenguista]

@ElPablo224

I'm up over 10%, and I expect a lot of others on here are up also. Hating on T at 38 is very different than hating at 27.

[Mayo Man]

@Flamenguista I’m good too

[rvt1046]

I own now over 50 stocks, most all divd payers which include 28k of T and 20k of VZ. Added to some stocks this year but the pullback never happened again for what I was looking for. Can't make squat on a ton of dry powder I have. Kills me to sit on cash making next to nothing but don't see many divd stocks as values right now. I have had DTV for 12 years, yes a pain to make a deal every time but the hassle to switch is such a pain too and they know it. Had Dish before DTV for 6 years but they wouldnt negotiate. T does need new mgt, but I will keep collecting the divd. Unless they have something great coming out with DTV they should probably sell it soon.

[craftbrewinfo]

@rvt1046 I feel your pain ! what was undervalued pre-November has shot through the roof! If adding to any of my existing positions, i'm increasing my cost basis.. have found a few slightly undervalued/fairly valued new names to add recently. The question will be to add in small tranches slowly or miss the rally.. alot of ink about a sustained rally, a transition into value stocks from money on the sidelines... I'm always looking over my shoulders though. the P/E multiples are sky high and it really spooks me..

[ALLDAY1]

$T did have a management change in July. I have never sat with dry powder and am always about 99% invested and will even buy 1 share if the money is available I have 33 positions wit as of to nite 1.6M invested and largest position is $PCI with 7669 shares , I also have $T at 2830 shares and $VZ at 702

Wishing you a great Holiday period and stay safe.

Allday

[Junk Dealer]

@rvt1046 I the same boat. Looking for end of Dec sale off. If not will have to start averaging up :(

[jrc50]

Where does that put UVerse?

[Insouciant Investor]

@jrc50

Uverse is legacy stuff also included with the satelite. The only TV product moving forward is AT&T TV (excluding what WarnerMedia is doing on its own).

[Nettligent]

AT&T will have massive layoffs ahead. DirectTV and Dish Networks are the worst companies.

[Report risk]

@Nettligent

Well T is mainly a cell phone company, and that’s doing well. Their second biggest segment is Time Warner / HBO, and that’s taking a pandemic hit but will likely return to normal in the future. T also has business land lines and internet. DirecTV’s weakness alone won’t lead to “massive layoffs”.

[1to3 Investing]

@Report risk The announcement of first-run movies direct to HBOMax likely will add 10+ million more folks to streaming rolls of T. That brings in well over $1B in revenue in a year. (of course, this was mentioned before the recent action where other saw the potential growth!)

[edster51]

@Report risk No, he job losses are to make outsiders think some is actually changing. I worked with IOT - a very hot and growing sector of wireless so limited need for capital compared to other things. The job losses were because of ElliotI was one of the folks who were surplused. Now that It happened, I’m retired and much happier than when I worked there.

[LazyGringo]

Major losses from Directv were more than priced into the stock years ago. It was around 45 back then and then fell to 37 because of Directv, then went all the way down to 27 because of covid and a perceived bad launch of HBO Max, but that was a huge over-reaction as verizon barely fell at all, covid didn't really hurt ATT and now they have fixed their new HBO Max strategy (like it or not, it's realistic and bullish) and HBO Max will be the hottest streaming service for the next year with the most growth and is already giving Netflix a run for its money. So now if they also sell CNN then their debt would actually be less than Verizon has. Very reasonable at a time when debt is super cheap anyway. Which means, in a fair market, the stock price should get back to 37 at least.

[PennyPlanSupporter]

The people who lost T investors $50 billion walked away with ~$23 million each in severance and exercised stock options.

Never say America is a fair nation.

[Caywyn]

@DeepValueLover How do you get that $50 billion figure? I’m also wondering if that prices in the cash flow DirecTV has had since it was acquired which, while I haven’t done the math in a while, last I saw was in the $35 billion range. Also, does that $50 billion loss include the $15 billion they’d get for selling half of DTV and the $15 billion in value that would be remaining? Because, according to my math that would total up to around $65 billion (plus you’d have to properly adjust inflation, which is more math than I care to do).

Still not a good acquisition, but I don’t see how you figure a $50 billion loss.

[PennyPlanSupporter]

@Caywyn

Goodwill and opportunity costs included

[LazyGringo]

CNN is having a banner year, ratings way up in the US and by far the biggest best news source in the world including CNN Espanol. It doesnt really fit into the new gameplan though so they could sell it and probably reduce debt by another 35 billion.

[Caywyn]

@LazyGringo I agree. I think CNN has a lot more value than people give it credit for. Too many Trump fans just wholesale discount CNN because they don’t like the coverage Trump gets. That doesn’t mean CNN US doesn’t make money though and world wide CNN is a huge brand. You can’t go to an airport without seeing CNN (or BBC World News, but that’s another subject). I don’t really care what their coverage is, I care about the money they make and I see big value for those two reasons.

I also agree though that it doesn’t seem to make a lot of sense going forward. As good as the business is, I don’t really see that it provides much value to HBO Max even if they were to include it and with most of their content being news which is only valuable when it’s new, they’re not even creating back catalog content to license or put on Max. Given that, valuable and likely profitable though it may be, sell it, take the cash and remove a reason for people to criticize the stock. To me it makes much more sense to sell CNN over Crunchyroll or the video game division or even DirecTV (which while the cause of most of the share price woes at least generates a bunch of cash).

[jimoc]

@LazyGringo, they also follow the head pedophile closely down there too. so what? handouts handouts handouts

[cost.basis]

Sell it. Pay some debt and buy more 5G spectrum.

[networks_insider]

@cost.basis Absolutely. DTV is not a core business and mid-band spectrum auctions are about to happen. If T doesn't get big-time into midband (C-band, whatever) then they won't be competitive longer term in 5G. That spectrum will cost billions. Sell DTV.

[networks_insider]

SELL IT

[ALLDAY1]

I actually think it's funny. So many posters have been calling out what an idiotic , stupid move it was for $T to buy Direct TV and they should get rid of it.

Now they may have a chance to get rid of it and OMG , why would they want to and OH!!! the debt and they have said everything about just how stupid that would be and the lost money from the original buy which assumed the debt owed. It $T were to execute the transaction and get rid of it, just think the

anti-at&t'ers would have one less thing to B-T-H about.

Of course I do not know but if there is no reason to keep it, WHY keep it.

hey complain about CNN as well but CNN is a profitable entity for the company.

Laughter

Allday

[HPBunker]

@ALLDAY1

DTV is profitable. It's less profitable every year, but it's still profitable. And every potential buyer knows it's a sinking ship; AT&T won't be fooling anyone.

So AT&T is selling a dying asset at a huge loss. This is simply window dressing. It makes no business sense. DTV never should have been purchased, but once the company did so, they should have kept it.

The service could at least be bundled with HBO and wireless plans. There were a few, small synergies. Now there will be zero synergies, and a big pay day for all the lawyers who work on the transaction, plus lots of "one time" restructuring charges. Fun.

[Flamenguista]

@HPBunker

Whether they are selling at a loss shouldn’t be factored in the decision at all. They are selling a dying business. The damage is done, and they aren’t going to right this ship.  

If you want to argue price, or fair value taking into account rapid diminishing returns, then that’s a different argument.

[ALLDAY1]

MY view

@HPBunker well I disagree as it is similar to saying gee they pay a good dividend but the stock is worth only half what I paid for it. When you could have taken the money and invested it elsewhere and in this case reduced the debt. If you are wondering I am LONG 2830 shares and from a value standpoint I am also positive. While I understand that DTV maybe making a profit they also reduce the debt and the debt is what is holding down the share price..

My view.

Have a great holiday

Allday

[ginsaw]

As a very satisfied AT&T income investor since 2000, if they're interested in knowing, I think they should take their time with selling DirecTV. There's no hurry. No urgency.

Just use this as a fishing expedition to find out what kind of offers are out there, to get a fix on where you are with this at an unusually low ebb in the economy. Which will get much better as the virus eventually gets rooted out or weakens on its own.

And why this advice?

This is a service that will automatically grow in size and subscriptions as rural populations and movement to rural areas continue to pick up speed. And it's happening right now. For multiple reasons.

It'll be more valuable later...lots more...unless you just gotta have the cash now type deal.

[networks_insider]

@ginsaw There are a host of services and technologies that will turn DirecTV into the TV equivalent of a landline in 5 years. T needs to unload this thing quickly while there is an offer on the table.

[ginsaw]

@networks_insider I don't doubt there are alternatives. But just now I know of some who simply hang an antenna out their window to pick up what traditional big three or whatever you want to call them stations...and that includes at least one with an advanced degree. Others would and do go for DirecTV. But, bottom line for that is, it must be something that can be viewed on a traditional size TV screen and not on a computer or a handheld app or something...so there is a large market.

I'd even do it myself, but at our hunter cabin at the farm we don't have electric power at all. Nor do I want any out there...

[Mayo Man]

@ginsaw There’s always a market of people who don’t want to pay for anything. Some people go for aerials from the 1960’s; I just want to watch what I want to watch. Not too price sensitive. I tried to get Direct TV at my house in Connecticut about 10 years ago because they had better soccer channels than my Comcast service. The DT guy told me that I’d have to take down a big tree in my back garden to provide a “line of sight” for the satellite. I said no, I like that tree, forget the soccer. After that I started getting calls from second tier guys who said they could put an aerial on my neighbor’s roof if I could get him to agree. WTF? Nowadays you can stream a menu of any channels you want on Wifi. Next up 5G,maybe I’ll be able to get rid of Comcast for internet too. But DTV via satellite? Sell it now. I can’t understand why they bought it for almost $50b, or why anyone would pay $15b for it now.

[HPBunker]

We were told for years that DTV was a critical part of AT&T, and provided invaluable targeted advertising insights to complement Xandr, which AT&T no longer talks about. This was all nonsense, apparently, if selling DTV for a 70% loss is considered "good" news.

[Flamenguista]

Well, I look at it like this: If they didn't make these bonehead moves in the past, I would have never been able to buy in at price points like I have. So, I toast a glass to Stephenson. Cheers and Good Riddance!