AT&T to Buy Time Warner for $85.4 Billion

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AT&T reached a deal Saturday to buy Time Warner for $85.4 billion, an acquisition that reflects the telecom giant’s desire to amass reputable TV and film content to diversify its massive but mature business of providing Internet access.

In the cash-and-stock deal confirmed by AT&T and Time Warner late Saturday, AT&T will pay $107.50 per share of Time Warner, whose diverse media portfolio includes HBO, CNN, TNT, TBS, Warner Bros., theme parks, Bleacher Report and a 10% stake in streaming service Hulu. The deal, approved by the boards of both companies, is expected to close before the end of 2017.

“This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers,” said Randall Stephenson, AT&T chairman and CEO. “Premium content always wins. It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen.”

The deal, if approved by regulators, would be one of the largest acquisitions ever in the telecom-media sector. It also lays bare AT&T’s grand ambition to control sizable market shares in both content and distribution businesses, a prospect that will surely trigger concern and scrutiny among federal regulators and consumer rights advocates.

“Joining forces with AT&T will allow us to innovate even more quickly and create more value for consumers along with all our distribution and marketing partners,” Time Warner Chairman and CEO Jeff Bewkes said in a statement.

Talks between the companies began in August, when Stephenson, based in Dallas, visited Bewkes in New York and spent several hours discussing the direction of their industries, Bewkes recalled in a conference call with reporters Saturday evening. “I’ve been involved in a lot of deals in my career,” Stephenson said. “This one’s unique. It began negotiating on its own very quickly. It was a natural process.”

Stephenson will lead the combined company. Bewkes said has agreed to stay on through the transition period for “a reasonable period of time.”

A year ago, AT&T shocked Wall Street by paying $48.5 billion to buy satellite TV provider DirecTV, giving it instant access to nearly all domestic markets for selling its pay-TV service and Internet-TV bundles. Analysts suggested at the time that AT&T would look to beef up its content offerings — already made attractive by DirecTV’s NFL Sunday Ticket deal — to fully seize the benefits of the acquisition.

AT&T’s growth strategy also entails the need to evolve its main business lines — providing Internet and wireless services. While customers’ bills for their telecom needs seemingly grow every year, the Internet market — wired and wireless — in the U.S. is saturated and growth potential is limited.

DirecTV and AT&T’s other pay-TV service, U-Verse, provide a level of revenue diversity. But investors still have been clamoring for AT&T to look elsewhere for growth, particularly as the market turbulence brought on by streaming technology and “cord-cutting” provides both opportunities and threats. With the integration of DirecTV largely completed, AT&T planned on focusing on buying more media and entertainment content companies.

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SOURCE: USA Today, Roger Yu