People pass by an AT&T store in New York.
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AT&T has signed an agreement with private equity firm TPG to separate its businesses from DirecTV, AT&T TV and U-Verse, according to a SEC statement on Thursday.
Under the agreement, AT&T and TPG will form a new entity called DirectTV that will own and operate the company’s DirectTV, AT&T TV and U-shaped video services. Bill Morrow, CEO of the US video unit at AT&T, was named CEO of the new company.
According to the company, the transaction involves a business value of $ 16.25 million for the new company. AT&T acquired DirecTV for $ 48.5 billion ($ 67 billion in debt) in 2015 and hoped to pair the national pay-TV company with its wireless service to offer a discount package to customers. Digital video distribution has supplanted satellites in recent years, causing the value of DirecTV to plummet and AT&T to change its strategy around HBO Max, its flagship streaming video service.
Following the closing of the transaction, AT&T will own 70% of the net worth and TPG 30%. The new company will be governed jointly by a board with two representatives from each of AT&T and TPG, as well as Morrow, the company said.
The two companies were expected to announce an agreement as early as this week, CNBC reported Tuesday. AT&T shares rose more than 1% in off-hours trading.
Elliott Management hedge fund took an active stake in AT&T in September 2019. In a letter to management, Elliott asked AT&T to focus its strategic operations while considering divesting non-core assets, including DirecTV.
DirecTV, U-Verse, and AT&T TV Now are based on a linear broadcast and cable television business that loses millions of subscribers each year.
– CNBC’s Alex Sherman contributed to this report.
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