SAN FRANCISCO & FORT WORTH, Texas - TPG, a global alternative asset firm, has announced its plan to purchase AT&T's remaining 70% stake in DIRECTV. This move, expected to close in the second half of 2025, will give TPG full ownership, building on the existing joint venture established in 2021.
The acquisition is poised to strengthen DIRECTV's financial foundation, enabling further investment in innovative video streaming services. DIRECTV, already a key player in pay TV, anticipates this deal will bolster its offerings and enhance customer experience.
DIRECTV CEO Bill Morrow expressed enthusiasm for the future growth and innovation that TPG's complete ownership will facilitate. TPG Partner David Trujillo echoed this sentiment, highlighting the potential for DIRECTV to rejuvenate its core services and expedite the development of its streaming platform.
As part of the transaction terms, TPG will make an initial payment of $2.0 billion to AT&T during 2025 with additional payments totaling $500 million by 2029. AT&T is expected to receive approximately $7.6 billion in cash from DIRECTV through 2029. Moreover, DIRECTV is set to distribute at least $1.625 billion to its equity holders before March 31, 2025.
The deal's completion is contingent upon standard closing conditions, including regulatory approvals. Post-transaction, DIRECTV will continue under its current management team, led by CEO Bill Morrow.
Barclays is the lead financial advisor for TPG, with legal counsel from Ropes & Gray LLP, Cleary Gottlieb Steen & Hamilton LLP, and Mintz, Levin. The transaction is based on a press release statement and contains forward-looking statements, which are subject to inherent uncertainties and risks.
TPG, founded in 1992 with $229 billion of assets under management, operates globally with a diversified strategy encompassing private equity, impact, credit, real estate, and market solutions. This acquisition reflects TPG's commitment to content distribution and its confidence in DIRECTV's future in the competitive streaming market.
In other recent news, TPG reported a GAAP net loss of $14 million for the second quarter of 2024, while robust after-tax distributable earnings stood at $207 million. Despite this, the company demonstrated a strong fundraising momentum, raising a substantial $6.3 billion in capital during the quarter, with a significant emphasis on credit strategies. The company also announced plans to sell PS, a company specializing in operating private terminals for commercial flights, to Groupe ADP, an international airport operator.
Goldman Sachs maintains a Conviction Buy rating on TPG, emphasizing the company's promising growth trajectory, especially in its Private Equity and Credit divisions. TD Cowen also adjusted its outlook on TPG, raising the price target to $43.00 from $42.00 while keeping a Hold rating on the stock, indicating a positive view of the company's future asset gathering activities.
These recent developments underscore TPG's forward-looking approach to its business and its commitment to capitalizing on market opportunities. The company is actively expanding its climate investing initiatives and expects to raise approximately $40 billion across new strategies from 2021 to 2025. The company also anticipates an earlier-than-expected launch of its next General Partner Secondaries fund by late 2025 and is preparing to introduce a PE Retail-dedicated fund.
InvestingPro Insights
TPG's acquisition of DIRECTV aligns with its strong financial performance and growth trajectory. According to InvestingPro data, TPG has demonstrated impressive revenue growth, with a 20.69% increase over the last twelve months as of Q2 2024. This robust growth suggests that TPG has the financial capacity to pursue significant acquisitions like DIRECTV.
The company's market capitalization of $21.16 billion underscores its substantial presence in the alternative asset management sector. This financial heft provides TPG with the resources to potentially enhance DIRECTV's offerings and accelerate its streaming platform development, as mentioned in the article.
InvestingPro Tips highlight that TPG has shown a strong return over the last year, with a remarkable 100.93% price total return. This performance indicates investor confidence in TPG's strategic decisions, which may extend to the DIRECTV acquisition. Additionally, TPG's liquid assets exceeding short-term obligations suggest a solid financial position to support this major transaction.
It's worth noting that InvestingPro offers 13 additional tips for TPG, providing investors with a comprehensive analysis of the company's financial health and market position. These insights could be valuable for those looking to understand the potential impact of the DIRECTV acquisition on TPG's future performance.
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