DirecTV Had Merger Talks With Competitor Before AT&T Deal

DirecTV, the largest U.S. satellite-TV operator, disclosed today that it had been in merger discussions with a competitor up until six days before agreeing to be bought by AT&T Inc.

DirecTV had been in talks to merge with an unnamed Company A at the same time the El Segundo, California-based company was discussing a transaction with AT&T, according to detailed merger documents that AT&T filed with the U.S. Securities and Exchange Commission today. After Company A ended the talks on May 12 because the relative prices of the companies was a “nonstarter,” DirecTV agreed to sell to AT&T for $48.5 billion on May 18.

While the filing didn’t disclose the name of Company A, Bloomberg News reported in March that Dish Network Corp. Chairman Charlie Ergen had contacted DirecTV Chief Executive Officer Mike White to discuss a merger of the two satellite companies, citing people with knowledge of the matter. Dish and DirecTV had tried to merge in 2002 and were blocked by regulators.

Talks with Company A had also taken place in 2011 before reemerging in December 2013, the filing shows. Meanwhile, AT&T CEO Randall Stephenson first initiated deal talks a year ago, before terminating them in September.

Then, Comcast Corp.’s $45 billion acquisition of Time Warner Cable Inc., announced in mid-February, changed everything. Talks started up again with Dallas-based AT&T in mid-March, and shortly after that, Company A contacted DirecTV to discuss a merger of equals.

Higher Price

Between April and May, DirecTV’s White persuaded Stephenson to raise the takeover price from the $85 a share in cash and stock originally offered on April 22, according to the filing.

On May 16, after Company A had walked away from discussions with DirecTV, the talks with AT&T almost fell apart over the bid at the time of $93.50 a share. DirecTV told its advisers to cease discussions with AT&T and cut off access to its due diligence data room.

Then, Stephenson and White were able to agree to a price of $95 a share later that day. The board approved the deal two days later.

White stands to receive a severance payment of $22.1 million in cash, equity and benefits after the merger closes and, in most cases, if he’s removed from his job, according to the filing. The company hasn’t disclosed White’s role after the merger.

The golden-parachute payout includes $7.4 million in cash, $9.1 million in unvested options and restricted stock units and $14.7 million in benefits. White also stands to get $5.5 million in salary and bonus after complying with a non-compete and non-solicitation agreement for two years.

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