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The Smart Trader
Read the latest news, information and analysis about the business world, what´s going on in the markets, and how it is likely to affect the company and affect you and your trades.
The Smart Trader
AT&T has agreed to acquire DirecTV in a deal worth approximately $48.5 billion. Both firms’ boards met on Sunday to approve the merger, although it is still subject to regulatory approval. Set to gain 38 million video subscribers in the US and Latin America, the deal means AT&T will assume control of America’s biggest satellite television provider. It serves as the latest indication that the US television market and wireless industry are converging. AT&T-DirecTV now looks set to become the second largest provider of television subscribers behind Comcast-Time Warner Cable.
T&T and DirecTV are expected to announce a merger worth close to $50 billion in cash and stock, according to sources familiar with the matter. The sources, both of whom have maintained anonymity, forecast that DirecTV shares will be valued in the low $90s, markedly improved on Tuesday’s closing $86.08. A report in the Wall Street Journal suggests the deal may be finalised within a fortnight. It is not yet understood what role DirecTV’s Chief Executive Officer Mike White will play in the merged firm; Bloomberg suggest DirecTV may continue to operate in its current capacity, as a unit of AT&T. Speculation surrounding potential movement in the telecommunications industry has been rife over the past number of weeks. In fact, spreadbetting.com cited the prospects of this very merger just 12 days ago (AT&T and DirecTV..).
Federal Reserve Chair Janet Yellen has issued the clearest indication yet that the central bank may continue to stimulate the US economy. Speaking before the Senate Budget Committee on Thursday morning, Yellen’s prepared remarks reiterated comments she made a day previous to the congressional Joint Economic Committee. Yellen’s Fed is adopting a wait-and-see approach to reducing its economic stimulus, having previously reassessed Ben Bernanke’s milestone of a 6.5% unemployment rate (Fed policy..). Yellen noted that the Fed will continue to ease its stimulants "As long as we continue to see improvement in the labour market”. Yellen also pointed to the improving state of the US economy in her address, claiming it’s “on track for solid growth this quarter”.
Tuesday saw Twitter Inc. sink to its lowest share price on the New York Stock Exchange since its November 6th 2013 initial public offering. The tech giant lost almost 15% in early morning trading as more than 480 million insider shares became eligible for sale. Shares issued mainly to non-executive employees exited a 6 month ‘lockup period’, culminating in the flurry of morning transactions. The $26 per share initial listing means that insiders capped a sizeable gain on sale; however, the stock’s aggressive growth in late 2013 will no doubt have left those shareholders wondering what might have been.
AT&T has approached satellite TV operator DirecTV about a possible merger, according to the Wall Street Journal. The paper reported that DirecTV would be “open to a deal” with the second largest mobile service provider in the US, but did not cite its source. Analysts suggest the potential acquisition would cost AT&T north of $40 billion, the current market capitalisation of DirecTV. Currently boasting 20 million customers, DirecTV is the second biggest pay TV operator in America. The proposed merger would see AT&T gain a stronghold in pay television, thus affording it the opportunity to develop bundled wireless and TV services. Telecom giants AT&T and Verizon have been increasingly directing focus towards broadband services in recent years; the traditional fixed telephone market is in sharp decline.