AT&T agrees to merger with Time-Warner in $85.4bn deal
Trump says he will block transaction
AT&T said on Saturday it agreed to buy Time Warner for $85.4 billion (R1.19 trillion), the boldest move yet by a telecommunications company to acquire content to stream over its high-speed network to attract a growing number of online viewers.
The biggest deal in the world this year will, if approved by regulators, give AT&T control of cable TV channels HBO and CNN, film studio Warner Brothers and other coveted media assets. The tie-up will likely face intense scrutiny by US antitrust enforcers.
AT&T will pay $107.50 per Time Warner share, half in cash and half in stock, worth $85.4bn overall, according to a company statement. AT&T said it expected to close the deal by the end of 2017.
Dallas-based AT&T said the US Department of Justice would review the deal and that it and Time Warner were determining which Federal Communications Commission licences, if any, would be transferred to AT&T in the deal.
US lawmakers were already worried about cable company Comcast Corporation’s $30bn acquisition of NBCUniversal, creating an industry behemoth. Several argued for close regulatory scrutiny of the AT&T deal.
US Republican presidential nominee Donald Trump said at a rally on Saturday he would block any AT&T-Time Warner deal if he wins the November 8 election. Trump has complained about media coverage of his campaign, especially by Time Warner’s CNN. “It’s too much concentration of power in the hands of too few,” said Trump.
The amount AT&T paid to acquire DirecTV last year.
Powerhouse
AT&T, whose main wireless phone and broadband service business is showing signs of slowing, has already made moves to turn itself into a media powerhouse. It bought satellite TV provider DirecTV last year for $48.5bn. It had about 142 million North American wireless subscribers as of June 30, and about 38 million video subscribers through DirecTV and its U-verse service.
New York-based Time Warner is a major force in movies, TV and video games. Its assets include the HBO, CNN, TBS and TNT networks as well as the Warner Brothers film studio, producer of the Batman and Harry Potter film franchises. The company also owns a 10 percent stake in video streaming site Hulu.
The deal is the latest in the consolidation of the telecom and media sectors, coming on the heels of AT&T’s purchase of NBCUniversal. AT&T’s wireless rival Verizon Communications is in the process of buying internet company Yahoo for about $4.8bn.
Time Warner chief executive Jeff Bewkes rejected an $80bn offer from Twenty-First Century Fox in 2014.
AT&T said the cash portion of the purchase price would be financed with new debt and cash on its balance sheet. AT&T said it has an 18-month commitment for an unsecured bridge term facility for $40bn.
AT&T currently has only $7.2bn in cash on hand. Further borrowing could put pressure on its credit rating as it already had $120bn in net debt as of June 30, according to Moody’s.
AT&T said the deal would add to earnings per share in the first year after closing. It said it expects $1bn in annual run-rate cost savings within three years of closing, chiefly driven by lower corporate and procurement spending. – Reuters