DirecTV and Dish are merging, creating a pay TV mega-company during a time of great volatility in the linear and pay TV space.
The deal will see DirecTV acquiring the video distribution business of Dish’s parent company EchoStar, which includes SlingTV, for a “nominal consideration” of $1, plus the assumption of debt. That debt totals approximately $9.75 billion, but the deal includes seeking certain consents from the holders of such notes to facilitate the acquisition. The deal is being touted as providing a “more robust competitive force” in an environment dominated by streaming services. It also seeks to improve EchoStar’s financial profile as the company continues to deploy its nationwide 5G Open RAN wireless network.
Both DirecTV and Dish are hoping the increased scale of their combination will incentivize programmers to let DirecTV offer smaller packages at lower price points. This deal will also allow the companies to improve their streaming options and share in fixed infrastructure and operating expenses.
“DirecTV operates in a highly competitive video distribution industry,” Bill Morrow, CEO of DirecTV, said in a press release. “With greater scale, we expect a combined DirecTV 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,” Hamid Akhavan, president and CEO of EchoStar, said in a press release. “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 U.S. 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.”
In recent years, satellite pay TV has been in a precarious place. Since 2016 alone, DirecTV and Dish have collectively lost 63% of their satellite customers as traditional pay TV penetration in U.S. households is now less than 50%. Many recent carriage deals have outlined the shift from satellite and pay TV to streaming. Both Disney’s agreement with DirecTV earlier this month and Warner Bros. Discovery’s agreement with Charter include provisions that give pay TV customers access to these companies’ streaming properties.
LionTree, a boutique investment bank with deep roots in media, communications, consumer, and creative industries, is serving financial advisor to DirectTV and TPG as the parties look to complete the deal. PJT Partners is serving as lead advisor.
