DirecTV scrapping DISH merger
DirecTV walking away after DISH bondholders reject debt exchange
DirecTV says it is walking away from its planned acquisition of EchoStar's video distribution service, DISH DBS, after DISH bondholders rejected a debt exchange offer from the satellite TV provider.
"A successful exchange was a condition for acquiring the DISH video business," a DirecTV spokesperson said Wednesday in a statement to FOX Business. "Given the outcome of the EchoStar exchange, DIRECTV will have no choice but to terminate the acquisition of DISH by midnight on November 22."
DirecTV and DISH satellite dish receivers are seen on the roof of a home in Wrightwood, California, on Sept. 30. (Kyle Grillot/Bloomberg via Getty Images / Getty Images)
DirecTV announced in September it would pay $1 for DISH DBS, which means it would own DISH TV and Sling TV, and agreed to assume $9.75 billion of DISH's debt in the deal.
However, a group of DISH bondholders on Monday rejected the proposed debt-exchange offer from DirecTV that was contingent upon them accepting a "haircut" of $1.5 billion.
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EchoStar spokesperson Ted Wietecha acknowledged in a statement to FOX Business that a successful exchange was a condition of the deal and that DirecTV had expressed it has no choice but to cancel the acquisition.
"As mentioned on our recent earnings call, we have a more robust foundation to operate and grow EchoStar’s business, independent of the exchange outcome," Wietecha said. "EchoStar received $2.5 billion in financing in September to pay its upcoming debt maturity, and raised an additional $5.6 billion in financing as part of a series of financial transactions recently announced. These funds are unaffected by the DIRECTV transaction."
DirecTV says it will have to walk away from its planned acquisition of Dish after bondholders rejected a debt exchange that was part of the deal. (Jaque Silva/SOPA Images/LightRocket via Getty Images / Getty Images)
The proposed merger was seen as a strategic consolidation in a shrinking pay-TV market as both DirecTV and DISH face intensifying competition from streaming services.
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Streaming services have gained dominance in recent years over satellite TV due to their on-demand accessibility with internet connectivity. As subscription prices for traditional satellite TV increased and the desire for on-demand viewing surged, more households began to cut the cord from traditional satellite providers.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SATS | ECHOSTAR CORP. | 21.52 | -1.24 | -5.45% |
EchoStar Corp.
In announcing the proposed merger, DirecTV and EchoStar said that the deal would benefit consumers "by creating a more robust competitive force in a video industry dominated by streaming services owned by large tech companies and programmers."
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The deal would also provide a crucial lifeline to EchoStar, which was co-founded by telecommunications entrepreneur Charlie Ergen and is currently saddled with more than $20 billion in debt.
FOX Business' Daniella Genovese and Reuters contributed to this report.