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DIRECTV is New Holding in OZ Management’s Portfolio

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Apr. 24 2015, Updated 9:06 p.m. ET

OZ Management’s holdings in DIRECTV

OZ Management initiated a new stake in DIRECTV (DTV) by purchasing 3,823,963 shares of the company, representing 0.89% of the fund’s 4Q14 portfolio. The fund is part of the iShares Russell 1000 Growth ETF (IWF) with an exposure of 0.38%.

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Update on the merger between DIRECTV and AT&T

DIRECTV announced earlier that it’s entering into a merger deal with AT&T (T) that will create a leading content provider across broadband, video, and mobile platforms. This combination will bring together two major companies that possess complementary scale and strengths in broadband, video, and mobility services. The combined entity will be appropriately positioned for meeting the evolving needs of consumers within the broadband and video segments.

According to a March 25, 2015, Forbes article, the deal between AT&T and DIRECTV is expected to attract less attention and scrutiny than the deal between Comcast (CMCSA) and Time Warner Cable (TWC). A wide range of parties have been fiercely opposing the deal between Comcast and TWC for fear that the merger will leave consumers with fewer choices. In the AT&T and DIRECTV deal, AT&T is a telecom company and DIRECTV provides satellite TV services. There isn’t much overlap in the core businesses of these companies.

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DIRECTV’s 4Q14 and full-year results beat estimates

In February 2015, DIRECTV announced its 4Q14 and full-year results for the financial year 2014. DTV reported 4Q14 revenues of $8.92 billion, an increase of 4% on a year-over-year basis, whereas full-year revenues were up 5% at $33.3 billion.

DIRECTV’s 4Q14 EPS (earnings per share) was unchanged at $1.53 compared to last year’s fourth quarter. EPS for the financial year 2014 was $5.40, up from $5.17 for 2013. The company’s free cash flow decreased to $814 million in 4Q14 from $1 billion in 4Q13. It was $3.1 billion for the year ended December 31, 2014, up from $2.6 billion in the financial year 2013.

Mike White, president and CEO (chief executive officer) of DIRECTV, stated, “Our fourth quarter results, although marked by challenging macroeconomic conditions in Latin America and a conscious decision to reinvest in our U.S. business, capped off another strong year of operations for DIRECTV….2015 will bring additional challenges to our businesses, but given our solid continued operating momentum and the pending merger with AT&T, I am confident that we will continue to drive value for our shareholders for the foreseeable future.”

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DIRECTV and Walt Disney sign expansive agreement

In December 2014, DIRECTV and The Walt Disney Company (DIS) announced an agreement that will offer DTV customers access to Disney’s expansive list of top quality news, sports, and other entertainment content across televisions, tablets, computers, and other devices. This deal will complement DIRECTV’s goal as well as Disney’s goal to deliver the best content in video across various platforms.

About DIRECTV

DIRECTV is a provider of digital television entertainment in the United States and Latin America. It operates two direct-to-home (or DTH) business units: DIRECTV US and DIRECTV Latin America.

DIRECTV Latin America owns approximately 93% of Sky Brasil, 41% of Sky Mexico, and 100% of PanAmericana. DIRECTV’s Latin American business is the leading pay-TV provider in the region with more than 18 million subscribers, including all Sky Mexico customers. The region has an underpenetrated pay TV market with about 40% of households subscribing to pay TV. The region also has a growing middle class, which is DIRECTV’s fastest-growing customer segment.

In the next part of this series, we’ll cover OZ Management’s boosted position in CDK Global Inc. (CDK).

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