DirecTV-Dish Merger In Jeopardy: Here's The Issue

Satellite TV provider DirecTV announced Tuesday that it will withdraw from its proposed acquisition of Echostar's satellite television business, including Dish TV, by Nov. 22 if bondholders don't consent to a debt exchange.

On Monday, Dish bondholders rejected DirecTV's revised offer, which reduced the minimum loss on $8.9 billion of bonds by $70 million to $1.5 billion. As part of this offer, the acceptance deadline was extended to Tuesday, 5 p.m. ET.

That put the transaction on shaky ground, Bloomberg reported.

"A successful exchange was a condition for acquiring the Dish video business," a DirecTV spokesperson told Reuters. "Given the outcome of the EchoStar exchange, DirecTV will have no choice but to terminate the acquisition of Dish by midnight on Nov. 22."

DirecTV's proposed acquisition of Dish was a response to the downturn in the pay-TV sector.

Announced in September, the merger aimed to increase competitiveness in a rapidly evolving media landscape, reduce expenses, and pool resources in the face of growing competition from streaming services.

Under the two-step deal, DirecTV agreed to pay $1 to buy Dish DBS, which included both Dish and Sling TV, and to take on around $9.75 billion of Dish's debt. Then, to restructure the debt and prolong its maturities, Dish and DirecTV jointly offered a discounted swap offer.

As DirecTV will no longer get into discussions on the debt-exchange proposal, the onus has shifted to EchoStar Chairman Charlie Ergen, who must engage in crucial negotiations with Dish creditors to salvage the merger, Bloomberg reported.

Ergen's discussions with creditors will determine the fate of the deal, given DirecTV's icy demeanor toward furthering it.

The merger of DirecTV and Dish Network, which would have formed the largest U.S. pay-TV provider with almost 20 million members, was being discussed by DirecTV's joint venture partners, AT&T and TPG

To address diminishing subscriber numbers amid evolving consumer preferences toward streaming services, the proposed transaction sought to unify the satellite TV business.

Dish's bondholders have to agree to a smaller payout on the company's debt for the merger to proceed. Regardless of the outcome of the merger, TPG plans to separately purchase AT&T's interest in DirecTV.

With $2.722 billion in easily accessible capital, including cash, equivalents, and marketable securities, Echostar reported a strong cash position. It will be able to handle its $1.983 billion debt obligation, which is due this month.