Financial Intelligence learned that DirecTV and Dish have agreed to merge, creating the largest pay TV provider in the USA. Under the terms of the deal, DirecTV will acquire Dish from its owner, EchoStar Communications (SATS.US), for a nominal consideration of $1 plus approximately $9.75 billion of Dish's debt. The statement indicates that the transaction is subject to the approval of Dish's bondholders agreeing to write down at least $1.568 billion of the company's debt principal. Pending regulatory approval, the transaction is expected to be completed in the fourth quarter of 2025.

DirecTV is owned by AT&T Inc. (T.US) and its joint venture partner TPG Inc. (TPG.US). In Monday's deal, TPG will acquire the remaining 70% stake in DirecTV from AT&T for $7.6 billion in cash.

For twenty years, DirecTV and Dish have been intermittently considering a merger. Despite antitrust lawsuits by US regulators in 2002 that blocked previous attempts, the landscape of the television industry has changed significantly since then. Two decades ago, satellite providers brought TV to rural areas without cable television. Now, many of these regions have access to broadband internet, reducing reliance on satellite TV.

Meanwhile, the rise of popular streaming services like Netflix (NFLX.US) and Amazon (AMZN.US) with Prime Video has eroded revenue in the pay TV industry, leading millions of consumers to cancel their services.

DirecTV CEO Bill Morrow stated that the merger of DirecTV and Dish is not a matter of 'if' but 'when.' The combined company will gain greater leverage in negotiations with programmers, helping these companies survive.

Morrow expressed in an interview: 'We want to use our influence to tell programmers: we are the only pure-play entity focused on video, not content-specific, so let us provide services to consumers that you can't.'

Both DirecTV and Dish now offer online TV packages that replicate traditional cable or satellite TV packages. By the end of 2023, DirecTV is estimated to have 11.3 million users. Dish, controlled by billionaire Charlie Ergen, reported in an August conference call that it had 6.1 million satellite customers and 2 million Sling TV online service users in the second quarter.

The merger of DirecTV and Dish could result in annual cost synergies of at least $1 billion. The combined company will be known as DirecTV, but will continue to sell Dish TV and Sling TV under their respective brands. It will be led by Morro.

According to a statement on Monday, TPG Angelo Gordon and some of its co-investors, along with DirecTV, have agreed to provide $2.5 billion in financing to EchoStar Communications for the full refinancing of Dish's debt due in November 2024.

PJT Partners Inc. serves as the chief financial advisor to DirecTV, while Barclays serves as TPG's chief financial advisor. JPMorgan is the chief financial advisor to Dish, with Bank of America, Evercore Inc., LionTree Advisors, and Morgan Stanley also providing financial advice to DirecTV and TPG.