There is a new market leader in the U.S. pay-TV business, and it will be controlled by private equity—mirroring the rapid advance of that industry across sports.
As expected in recent days, DirecTV reached an agreement Monday to acquire satellite-TV rival Dish Network from that provider’s corporate parent, EchoStar Corp. The deal—for just $1 and assumed debt of about $9.8 billion—will create by far the country’s top TV distributor with nearly 20 million subscribers. The pact also includes Dish Network’s streaming entity, Sling TV.
A key part of the overall set of pacts will also involve private equity giant TPG Inc., previously a 30% equity partner in DirecTV, buying out the majority shares in the company held by AT&T for $7.6 billion.
“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,” said DirecTV CEO Bill Morrow.
Closing of the deals is targeted for late 2025, subject to various regulatory and shareholder approvals, though TPG’s takeover of DirecTV is not contingent on the Dish Network acquisition.
Desperate Times
The DirecTV–Dish Network agreement completes a contemplation of a merger that goes back more than two decades and was scuttled by federal regulators in 2002. The current pay-TV market, however, is very different from what existed more than a generation ago, most notably through the rise of streaming and major players there such as Netflix and Amazon Prime Video. As a result, securing regulatory approval is expected to be a much easier process than before.
At least in the short term, DirecTV and Dish Network will be operated as separate brands, even as the combined company is based at DirecTV’s current headquarters in El Segundo, Calif. But the combined entity is expected to have greater negotiating strength with programmers and will be seeking an ability to construct more tailored packages for subscribers, in line with what DirecTV just did with ESPN parent company Walt Disney Co. Given the dominance of sports across the entire U.S. television industry, sports figures to be a key element of that customization.
The merger deal, meanwhile, gives a critical lifeline to the Charlie Ergen–led EchoStar, which has amassed more than $20 billion in overall debt, and will also get refinancing help from TPG to help with its restructuring. That hefty amount of debt helps explain the nominal purchase price for DirecTV.
“It’s hard to argue that a merger shouldn’t happen; it clearly should,” MoffettNathanson principal analyst Craig Moffett wrote in a note to clients. “Consolidation during a period of secular decline is always to be expected.”
