AT&T agrees in principle
to buy Time Warner for $85 billion: sources
Send a link to a friend
[October 22, 2016]
By Jessica Toonkel and Greg Roumeliotis
NEW YORK (Reuters) - AT&T Inc <T.N> has
reached an agreement in principle to buy Time Warner Inc <TWX.N> for
about $85 billion, sources said on Friday, paving the way for what would
be the biggest deal in the world this year, giving the telecom company
control of cable TV channels HBO and CNN, film studio Warner Bros and
other coveted media assets.
The deal, which has been agreed on most terms and could be announced as
early as Sunday, would be one of the largest in recent years in the
sector as telecommunications companies look to combine content and
distribution to capture customers replacing traditional pay-TV packages
with more streamlined offerings and online delivery.
AT&T, which sells wireless phone and broadband services, has already
made moves to turn itself into a media powerhouse, buying satellite TV
provider DirecTV last year for $48.5 billion.
It also in 2014 entered a joint venture, Otter Media, with the Chernin
Group to invest in media businesses, and has rolled out video streaming
services.
AT&T will pay $110 per Time Warner share in cash and stock, or about $85
billion overall, sources told Reuters. It will need to line up financing
to pay for the deal, since it only has $7.2 billion in cash on hand.
This could put pressure on its credit rating as it already has $120
billion in net debt as of June 30, according to Moody's.
![](http://archives.lincolndailynews.com/2016/Oct/22/images/ads/current/pestcontrol_bch_termites.png)
Time Warner's shares rose almost 8 percent in regular trading, and a
further 3.4 percent after hours, to $92.50, giving it a market value of
about $73 billion. AT&T closed down 3 percent at $37.49.
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 Bros
film studio, producer of the “Batman” and “Harry Potter” film
franchises. The company also owns a 10 percent stake in video streaming
site Hulu.
Time Warner Chief Executive Jeff Bewkes rejected an $80 billion offer
from Twenty-First Century Fox Inc <FOXA.O> in 2014, but sources said on
Friday that the former suitor had no plans to renew its bid.
The Wall Street Journal reported on Friday that Apple Inc <AAPL.O>
approached Time Warner a few months ago about a possible merger.
CONTENT AND DISTRIBUTION
Owning more content gives cable and telecom companies bargaining
leverage with other content companies as customers demand smaller,
hand-picked cable offerings or switch to watching online. And new mobile
technology including next-generation 5G networks could make a content
tie-up especially attractive for wireless providers.
"We think 5G mobile is coming, we think 5G mobile is an epic
game-changer," Rich Tullo, director of research at Albert Fried &
Company, said in a note, adding that mobile providers would be in
position to disrupt traditional pay-TV services.
[to top of second column] |
![](../images/102216pics/busine65.jpg)
A woman looks at her mobile next to AT&T logo during the Mobile
World Congress in Barcelona, Spain February 25, 2016. REUTERS/Albert
Gea/File Photo
![](../images/ads/current/demay_inv-lda081412.png)
A previous Time Warner blockbuster deal, its 2000 merger with AOL, is now
considered one of the most ill-advised corporate marriages on record.
Dallas-based AT&T and New York-based Time Warner declined to comment.
Cowen and Co analyst Doug Creutz questioned the strategy of buying content
instead of licensing it.
"What does it get them that they can't get by licensing Time Warner content and
at a much cheaper price than buying the whole company?" Creutz asked, noting it
was unclear what savings could be gained "from stapling distribution and content
together. It's been tried. It never works."
AT&T would likely be able to win U.S. antitrust approval for the deal, some
experts said, but regulators likely would put conditions on approval, some
experts said.
Andre Barlow, an antitrust lawyer at the law firm Doyle, Barlow and Mazard, said
the government may worry about whether other cable and internet companies would
continue to have access to Time Warner content like HBO and CNN.
The U.S. Justice Department "will look at it but they won't stop it," said
Darren Bush, who teaches antitrust issues at the University of Houston. Bush
predicted regulators as a matter of course would make a second request for
information, meaning the review would last several months.
The media industry has been seen as ripe for consolidation, and several stocks
rose on the news, including Netflix Inc <NFLX.O>, which closed up about 3.4
percent, and Discovery Communications Inc <DISCA.O>, which ended up 3.6 percent.
![](http://archives.lincolndailynews.com/2016/Oct/22/images/ads/current/Lincoln-Heating-sda-HI-2015.png)
(Additional reporting by Liana B. Baker in San Francisco, Anya George Tharakan
in Bengaluru and Diane Bartz and David Shepardson in Washington; Writing by
Meredith Mazzilli; Editing by Will Dunham and Bill Rigby)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |