As audiences continue to ditch broadcast television in favor of streaming, El Segundo-based satellite television company DirecTV will be spun off from parent company AT&T Inc.
 
Dallas-based telecommunications conglomerate AT&T will sell a 30% stake in DirecTV to San Francisco-based private equity firm TPG Capital and keep the remaining 70%, the company announced Feb. 25.

The companies will form a new entity under the DirecTV brand name which, will also include AT&T’s other U.S.-based pay-TV subscription services, U-Verse and AT&T TV.

The deal values the new entity at $16.25 billion, a steep discount from the $48.5 billion that AT&T paid to acquire DirecTV in 2014. When AT&T agreed to purchase DirecTV, the company had 25 million customers. Now it has 17.2 million.
 
The popularity of streaming is reaching new heights, and pay-TV companies have struggled as a result, with major companies such as Comcast Corp. and Dish Network Corp. losing millions of customers in recent years, according to the Wall Street Journal.
 
 AT&T placed its bets on streaming with the launch HBO Max in May, which has garnered more than 17 million activations, according to   AT&T's fourth-quarter results  .
 
 AT&T will get $7.8 billion from the deal with TPG Capital, including $7.6 billion in cash and the assumption of $200 million in existing debt from DirecTV.  TPG will pay $1.8 billion for its minority stake. To fund the deal, the companies secured $6.2 billion in bank financing.  
 
John Flynn, principal at TPG, said in a statement that the new DirecTV will grow its streaming video service while leveraging the company’s pay-TV platform. New DirecTV customers will also have access to HBO Max.
 
“As video consumption habits evolve, the new DirecTV will continue investing in its offering to provide value to its customers, including through next-generation streaming pay-TV services,” David Trujillo, partner at TPG, said in a press release.
 
The deal is expected to close in the second half of 2021, AT&T said. The new entity will be led by Bill Morrow, who joined AT&T in 2019.
 
“As the pay-TV industry continues to evolve, forming a new entity with TPG to operate the U.S. video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability,” AT&T Chief Executive John Stankey said in the announcement.