A second attempt at a major media deal seems to be heading in the same direction it did the first time around — in failure.
DirecTV is calling off its plans to acquire the rival satellite TV giant, Dish Network, after Dish’s lenders refused to agree to the terms of the deal, DirecTV said Thursday night. The companies had said in September that they had reached a deal, but that it required two-thirds of Dish’s creditors to agree to exchange their debt in Dish for debt in the combined company at a discount. Dish’s creditors threatened to sue over the terms.
The acquisition would have created one of the largest pay-TV providers in the United States.
“They are both certain they will win, and so felt they were better off walking away than compromising,” Jonathan Chaplin, an analyst at New Street Research, said. “One of those parties has made a mistake. Unfortunately, it will take a while to figure out which one.
Bill Morrow, the chief executive of DirecTV, said in a statement that the company terminated the transaction because it believed the proposed terms were necessary to preserve’s DirectTV’s “operational flexibility.” He added that the company “will advance our mission to aggregate, curate and distribute content tailored to customers’ interests.”
Shares of EchoStar, Dish’s parent company, were down more than 3 percent in morning trading. The proposed deal was a multistep transaction that involved TPG acquiring a majority stake in DirecTV from AT&T for $7.6 billion. The private equity giant said it planned to go through with that purchase, even with the collapse of the Dish deal.
This is the second attempt to merge DirecTV with Dish. The first, in 2002, was blocked by the Federal Communications Commission and the Justice Department on the grounds that combining the two biggest satellite TV players would harm competitors.
But neither Dish nor DirecTV are the entertainment juggernauts they were in the early 2000s. The deal’s latest failure raises new questions about the future of both companies as cable and satellite businesses continue to lose subscribers to streaming companies.
Dish’s heavy debt load and dwindling cash have put analysts on watch for a potential bankruptcy. As part of the deal with DirecTV, TPG and its credit arm had helped Dish address a $2 billion payment and Dish’s parent company said it would continue to invest in the company’s transition into wireless. But it is unclear when those efforts will pay off or how Dish will continue to manage its cash flow.
TPG, meanwhile, has now doubled down on its investment in DirectTV, which continues to generate cash while also owning debt in its now-weakened rival.
Longer term, Mr. Chaplin said he still expected a deal to happen in some form or another. “There will still be enough value to make this deal appealing in a couple of years,” he said.
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