Merger Between DISH and DIRECTV Hits Major Snag Thanks to Investors
The transaction hinges on bondholders being willing to accept a $1.6 billion discount, and they’re less than thrilled about that option.
The creation of the largest pay-TV company in the United States may have to wait. DISH and DIRECTV announced official plans to merge in late September, after years of rumors that the two companies wanted to combine. But a new report from The Wall Street Journal indicates that the transaction is now in trouble, thanks to a group of investors that don’t have any desire to take less for the DISH bonds they hold in order to help the deal go through.
Key Details:
- The deal structure would see DIRECTV acquire DISH’s TV assets for $1, as well as take on around $8 billion of its debt.
- A group of DISH investors who own more than $10 billion in bonds from the company are being asked to take a $1.6 billion discount.
- If this group is not eventually persuaded, the transaction could be called off and DISH’s DBS sent to bankruptcy proceedings.
The Journal report has details about what the merger transaction would look like. It would see DIRECTV pay $1 to acquire DISH’s pay-TV business DBS, which will include DISH’s satellite operations as well as its live TV streaming service Sling TV. As part of the deal, DIRECTV would assume around $8 billion of DISH’s debt.
The deal is now being held up by a group of investors who own around $10.7 billion of DISH and DBS debt securities. In the merger, their bonds would be swapped out for new ones backed by the merged company, but they’ll be worth around $1.6 billion less than what they are currently holding.
That group has informed DIRECTV that it has no interest in the deal if they’re being asked to shave nearly $2 billion total off their collective investment. They say that DISH co-founder Charlie Ergen has already “siphoned billions in assets away from DBS rendering it insolvent,” and that they have no interest in another transaction that will essentially do just that.
If the objection of these bondholders derails the merger, it will put DISH in a very tough spot. It could mean DISH’s DBS heads for bankruptcy, with protracted litigation to follow. Not the ideal outcome for a pay-TV company that finally thought it had been thrown a lifeline.
If these investors can somehow be assuaged, a combination of DIRECTV and DISH would create the biggest pay-TV company in the United States, with nearly 20 million customers. DIRECTV believes that if the deal goes through, it will have more leverage to make favorable deals with channel owners that will help it keep prices for customers lower.
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