AT& T TO BUY TIME WARNER
US$85B deal faces antitrust scrutiny
AT& T Inc.'s agreement to buy Time Warner Inc. for US$ 85.4 billion would form a media and telecommunications empire that owns many of the movies and TV shows it pumps through to subscribers, provided that regulators sign off on a deal at a time that they and lawmakers have grown skeptical of media consolidation.
The deal caps AT&T chairman and CEO Randall Stephenson’s vision to expand into media and entertainment as his company’s wireless, Internet and pay-TV services businesses mature. Gaining premium cable channel HBO, CNN and the Warner Bros. studio means AT& T becomes a content owner rather than just a distributor of video — giving it extra reach amid disruptive changes in the ways that viewers decide what, and how, to watch.
“Having scale, reach and diversity of assets might offer the greatest protection of all,” said Walt Piecyk, an analyst at BTIG LLC in New York.
That scale also may invite extra regulatory scrutiny to the deal. The pairing faces a potentially rocky path through Washington as the Democratic and Republican presidential nominees both express suspicion of blockbuster transactions.
“An acquisition of Time Warner by AT& T would potentially raise significant antitrust issues, which the subcommittee would carefully examine,” said Senators Mike Lee, a Republican from Utah, and Amy Klobuchar, a Minnesota Democrat, said in a joint statement on Sunday.
The pair are the chairman and ranking member, respectively, of the Senate Judiciary Subcommittee on Antitrust, Competi - tion Policy, and Consumer Rights.
The cash- and- stock deal values Time Warner at about US$ 107.50 a share, the companies said Saturday in a statement, 20 more than Friday’s closing price. Time Warner shareholders are to receive US$ 53.75 a share in cash and US$53.75 a share in AT&T stock. The transaction is valued at US$108.7 billion, including Time Warner’s net debt.
Senior executives of the companies had met in recent weeks to discuss business strategies and an agreement was near as of Friday, Bloomberg reported, citing people familiar with the talks.
The acquisition comes a little more than a year after Dallas- based AT&T became the largest U. S. pay-TV distributor when it completed its $ 48.5 billion purchase of satellite-TV provider DirecTV.
“When we first discussed this we thought it might be unique enough and worthy of investigating whether we could put the two companies together and create some- thing different,” Stephenson said on a conference call Saturday night to discuss the deal.
Jonathan Chaplin, an analyst at New Street Research in New York, called the combination “an awkward marriage.” AT&T, rooted in a century-old telecommunications system, is attempting to pair a more stodgy culture with one that has a distinctly more dynamic New York media and Hollywood mindset.
One of the largest corporate employers in the country with some 281,000 workers at the end of last year, AT&T posted 2015 revenue of US$ 146.8 billion. Time Warner, with almost 25,000 employees, reported revenue of US$28.1 billion.
Cultural distinctions aside, the marriage is also sure to prompt close review by regulators and by rivals, some of whom may now be compelled to consider deals of their own.
The merger is subject to approval by Time Warner shareholders as well as review by the U.S. Justice Department, and is expected to close by year-end 2017.
Republican presidential candidate Donald Trump, who has complained about concentration power at media companies, said Saturday that he would look at blocking the combination if elected. Democratic nominee Hillary Clinton’s running mate, Senator Tim Kaine of Virginia, said on NBC’s Meet the Press that he shared “concerns and questions” raised by fellow Senator Al Franken, Democrat of Minnesota.
Franken, who sits on the Senate Judiciary Committee, said in a statement on Saturday that huge media mergers “can lead to higher costs, fewer choices, and even worse service for consumers.”
“A transaction of t his magnitude obviously warrants very close regulatory scrutiny,” a spokeswoman for Walt Disney Co. said.
The FCC’s newer rules have restricted growth for carriers in the telecom world. That’s driven them to integrate other businesses like television and media, Roger Entner, an analyst with Recon Analytics LLC in Dedham, Massachusetts, said in an interview before the deal was announced.
“The wildcard in all this will be the FCC,” Entner said. “It’s hard to predict what the regulators will do. They are pretty much starting with a blank page.”