DirecTV to Scrap Merger With Rival Dish
A tie-up meant to help struggling satellite-TV companies is falling apart after creditors balked at a proposal to cut into their holdings
DirecTV has decided to walk away from its proposed merger with rival Dish Network, abandoning a tie-up that the two satellite-TV companies have attempted several times.
DirecTV said that it informed Dish owner EchoStar SATS 0.60%increase; green up pointing triangle it plans to scrap the deal at 11:59 p.m. ET Friday. The decision came after a rebuke from bondholders representing about $10.7 billion of debt in Dish and its DBS subsidiary. The broader tie-up depended on the creditors’ approval.
In September, DirecTV agreed to buy Dish from EchoStar for a nominal $1, plus the assumption of debt. The deal started to break apart last week after the companies failed to secure concessions from the key creditor group.
The merger’s failure poses another setback for the satellite companies and their respective owners, EchoStar and TPG. Executives had banked on saving both satellite operators’ flagging fortunes by pooling their resources to negotiate better rates for the TV programming they carry.
Private-equity firm TPG is still set to buy the remainder of DirecTV it doesn’t already own from AT&T but now faces the prospect of managing a debt-laden business without the benefit of future cost savings to lift its trajectory. TPG bought a 30% stake in DirecTV in 2021.
EchoStar Chairman Charlie Ergen had planned to shed Dish and its SlingTV service to focus on building a new wireless network operator. The company has said it plans to move forward with those plans regardless of the satellite merger’s outcome.
Weeks before a November debt payment threatened to push EchoStar into bankruptcy, Ergen struck the deal to sell Dish to DirecTV. TPG also arranged $2.5 billion in new financing to keep EchoStar going.
Holders of Dish’s DBS bonds rebuked the offer, which would have forced them to take a roughly $1.5 billion haircut on their holdings in exchange for more secure debt in the soon-to-be-merged satellite-TV company.
DirecTV slightly sweetened the offer last month to get bondholders on board, to no avail. Ergen’s company hadn’t offered the creditor group any more concessions as of Thursday evening.
The bondholder group sued several EchoStar subsidiaries earlier this year, alleging that entities controlled by Ergen siphoned off billions of dollars in assets and put them out of creditors’ reach. The group amended its complaint Thursday after EchoStar raised more than $5.6 billion of new financing this month. In court papers, Dish and EchoStar denied wrongdoing and said that the asset transfers complied with debt contracts.