AT&T (NYSE:T) is exciting the entertainment business and selling its remaining 30% stake in DIRECTV to Dallas based private equity group TPG. The deal is expected to bring in approximately $7.6 billion in cash with payments spread out through 2029.

AT&T (“the Company”) reached an agreement to sell its remaining stake in DIRECTV to TPG. Under the agreement, the Company will sell its entire 70% stake in a non-contingent transaction subject only to customary closing conditions.

Over the past three years, the Company achieved financial outcomes consistent with its expectations that underpinned its decision to retain a 70% financial interest in DIRECTV. Reported cash distributions at, and since, the closing of its initial transaction with TPG totaled $19 billion and the Company expects to report an additional $7.6 billion of cash payments following this agreement to sell its remaining stake.

This sale allows AT&T to continue to focus on being the leading wireless 5G and fiber connectivity company in America. This transaction also continues to strengthen AT&T’s balance sheet by pulling forward cash expected over the next several years.

The Company expects the transaction to close in the second half of 2025.

For more details on the deal, see the 8-K.

-AT&T Press Release, Sept. 30th 2024

What This Means For AT&T

• Distribution Payments: AT&T will continue to receive quarterly distributions from DIRECTV, estimated to be around $1.1 billion in Q4 2024 and $2.8 billion in 2025. A special distribution of $1.625 billion is expected by March 2025, of which AT&T will receive 70%.
• Closing Timeline: The transaction is expected to close in the second half of 2025, and is contingent on regulatory approval and customary closing conditions.
• Termination and Liability Caps: If the transaction does not close by October 31, 2025, either party may terminate the agreement. Liability for damages due to termination is capped at $2 billion.
• AT&T Financial Position: The transaction is expected to strengthen AT&T’s balance sheet and allow the company to focus more on its core businesses like 5G and fiber connectivity.

This deal with strength AT&T’s balance sheet with is great news for income investors who hold the stock for the  5% yield. AT&T was previous a Dividend Aristocrat (meaning dividends increased for 25+ years in a row) until that streak was interrupted in 2022 after the WarnerMedia merger with Discovery.

Wall Street’s Take

According to Wall Street analysts. the median price target for AT&T is $22.24. Of the 25 analysts covering the stock, the consensus rating is 2.26, or “Outperform”.

 

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