Sunday, November 16, 2014

DirecTV and AT&T Merger Offers Investor Stellar Opportunity for Capital Gains

With the upcoming AT&T merger with DirecTV, shareholders of DirecTV are set to receive a nice package of compensation.  The proposed buyout price which will go into effect if the deal is approved by regulators is $95 per share.  DTV is currently trading at $87.55 per share, which offers investors a potential 8.51% short term upside in DTV immediately.

If the deal goes through, and AT&T shares trade at least at $34.90 per share, investors of DTV will receive stock worth $66.50 of value, and $28.50 in cash.

For example, if you buy 100 shares of DTV, which would cost you $8,755 right now (not including commissions), you will receive $28.50 back in cash if the deal is approved.  That means your cost basis of DTV will go down to $59.05 in AT&T shares, but you will be receiving $66.50 of value.

Essentially, by taking on the risk of the merger not going through, you get more than a 10% discount on AT&T stock now.  It is similar to buying AT&T stock at around $32-$33 per share based on its current price.  That makes its dividend yield even more enticing.

Disclosure, I am long T and DTV.

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