Less than a week before it announced its $67 billion merger with AT&T, DirecTV continued to hold talks with an undisclosed competitor, according to documents filed with the Securities and Exchange Commission Tuesday.
DirecTV first held talks with the competitor, identified only as Company A, back in 2011, but broke off discussions in September of that year without an offer being made. DirecTV chairman Mike White and his counterpart at Company A met briefly when both attended a conference in Washington D.C, in December of 2013, discussing operational challenges and the potential for a combination. Those talks heated up in February 2014, in the wake of Comcast’s announcement that it would buy Time Warner Cable in a deal valued at about $69 billion in stock and assumed debt.
DirecTV and Company A continued to hold discussions at a dinner meeting the evening of the Comcast/TWC announcement, with the DirecTV board requesting further information on Company A’s spectrum holdings, its strategic alternatives and further analysis into the likelihood of receiving regulatory approval for a deal.
While Company A was not identified in the SEC filings, Dish Network chairman Charlie Ergen was said to have contacted White about merger possibilities shortly after the Comcast/TWC deal was announced, according to several published reports. Dish also owns a large swath of wireless spectrum, which it plans to use for a wireless broadband service.
In March, while it was still holding preliminary discussions with Company A, White had a brief meeting with AT&T CEO Randall Stephenson while both were attending an unrelated Washington D.C. conference, where the possibility of a merger was brought up.
In the meantime, DirecTV and Company A began assessing regulatory options concerning a possible deal, while at the same time holding talks with AT&T officials. On April 22, AT&T made a preliminary offer for DirecTV for $85 per share, which the satellite company rejected as too low. On April 29, White advised Stephenson that stockholders would need a price in the mid-$90 per share range. Five days later on May 4, Stephenson said AT&T would increase its proposed price to between $93 and $95 per share, subject to other terms and separate due diligence of DirecTV’s Latin American operations. White, according to the SEC filing, told Stephenson that a price below $95 per share likely would not be accepted by his board.
By May 12, Company A had dropped out of the picture – it said the relative price levels of both companies made a deal a “non-starter,” according to the SEC filing – and less than a week later AT&T almost blew the deal by offering too low a price.
According to the filing, AT&T increased its offer to $93.50 per share on May 16, after which DirecTV told its advisors to cease contact with AT&T and to terminate the telco’s access to its due diligence data room. Shortly after, Stephenson contacted White, telling him the ante had been raised to $95 per share. The deal was announced on May 18.
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