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Is Direct TV up for sale?
Earlier this month, DirecTV told analysts on an earnings conference call that it has the option to pursue a tender offer up until it sends a proxy to shareholders for the Liberty Entertainment (LMDIA Quote) spinoff, which parent company Liberty Media (LINTA Quote), announced May 4. Liberty Media CEO Greg Maffei said the plan "clarifies DirecTV's capital structure." But Wall Street observers think the plan would position DirecTV for sale to a larger player -- presumably AT&T (T Quote) or Verizon (VZ Quote) -- looking to get a national TV service. The satellite TV shop has enjoyed strong subscriber growth amid a difficult economy and heated video competition from cable shops like Comcast (CMCSA Quote) and Cablevision (CVC Quote) as well as new TV services from telcos Verizon and AT&T. Tender offers typically offer a premium price to shareholders who agree to the sale, and, like conventional buybacks, they are seen as an effort by a company to show the stock is undervalued. DirecTV still has board authorization to repurchase $1.6 billion worth of shares. The company has $2.1 billion in cash available, and about a month of time before the proxy is expected to go out. Liberty Media declined to comment, and a DirecTV representative was not immediately available. Two weeks ago, the company said on the conference call that it was hoping to "get clarification" from the Internal Revenue Service on the tax implications of a stock buyback. Since then, executives have sounded a little warmer on the prospects of a tender. One executive, when asked recently whether the company was considering a tender offer or stock buyback in the $250 million range, replied that they were looking for a more "meaningful" amount, according to one source. A big tender offer doesn't have much bearing on DirecTV's business, and therefore it doesn't seem to have any compelling urgency to it. But from a merger and acquisition viewpoint, a company could worry about being undervalued at a time when the business might be on the block. Looker
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