AT&T reportedly has a deal to buy Time Warner for $85 billion (UPDATE)

AT&T reportedly has a deal to buy Time Warner for $85 billion (UPDATE)
In July, Verizon purchased Yahoo for $4.83 billion. Now, AT&T is about to make its rival's transaction look like small potatoes. Reports published late Friday say that AT&T has agreed to spend $85 billion to buy Time Warner. If the deal is made and closes, AT&T gets control of the iconic Warner Brothers movie studio and cable networks CNN and HBO. It also includes TNT and TBS, two former cornerstones of the now defunct Turner Broadcasting System. The deal would give AT&T more content to stream to its mobile customers. Warner Brothers alone owns the Batman movie franchise and the Harry Potter series.

UPDATE: The deal is now expected to be announced today. AT&T will pay between $105 to $110 a share for Time Warner. Shareholders will receive 50% cash and 50% AT&T shares for their Time Warner stock. Michael Nathanson, an analyst at MoffettNathanson, called Time Warner "the last scaled content play that’s acquirable." He noted that other media firms like Disney are practically untouchable when it comes to an acquisition.

The transaction would be the largest in the world for 2016. It comes nearly 30 months after the telecom giant purchased DIRECTV for $48.5 billion, picking up 38 million video subscribers in the process. AT&T has used that purchase to bundle its wireless service with Pay-TV quite successfully. 

Sources tell Reuters that the purchase will be made at $110 a share. Time Warner shares rose almost 8% in regular trading on Friday, and an additional 3.4% in after hours trading to $92.50 as rumors of the deal leaked. AT&T's shares declined 3.4% to $37.49. While the latest dispatches seem to indicate that Time Warner has agreed to end up in AT&T's arms, there always is the possibility of another suitor lobbing in a higher bid. Two years ago, Twenty-First Century Fox Inc. bid $80 billion for Time Warner, but that offer was rejected. On Friday, Twenty-First Century Fox Inc. said that it was not interested in going after Time Warner again.

AT&T has only $7.2 billion in cash that it can get its hands on quickly, which means that it will have to finance the deal. But the company already has $120 billion in net debt as of the end of last June. Borrowing additional money to finance the Time Warner purchase is sure to lower AT&T's credit rating. The cost of the deal has also led some analysts to question why AT&T would rather spend the money to buy Time Warner when they could spend much less to license Time Warner content.

In addition there is some question about whether AT&T can obtain Justice Department approval. To get antitrust regulators off its back, AT&T might have to agree to some conditions.

The transaction could be announced this Sunday.

source: Reuters, WSJ

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12 Comments

1. Ticklemyfancy

Posts: 214; Member since: Oct 09, 2016

$120 billion in debt and still going for an $85 billion deal! I must say that's pretty brave

2. fyah_king unregistered

That's the American dream, bro! We mostly pay with credit and some cash once in a while.

11. xondk

Posts: 1904; Member since: Mar 25, 2014

Build debt as much as possible, because as long as you are powerful enough no one can force you to pay?

3. boriqua2000

Posts: 258; Member since: Mar 11, 2009

Let's play Monopoly

5. trojan_horse

Posts: 5868; Member since: May 06, 2016

But the US' monopoly isn't fun to mess around with. lol

4. QWIKSTRIKE

Posts: 1459; Member since: Mar 09, 2010

AT&T wants to be like Verizon so bad

6. sissy246

Posts: 7120; Member since: Mar 04, 2015

Verizon is just as bad as att. They are both rip offs. If Tmobile worked good where I live in would switch but for jowls I will stick with att because it's better then Verizon.

7. sissy246

Posts: 7120; Member since: Mar 04, 2015

Edit But for now not jowls lol

8. JunitoNH

Posts: 1946; Member since: Feb 15, 2012

Rise of the Empire.

9. snowgator

Posts: 3621; Member since: Jan 19, 2011

I can't even wrap my feeble brain around how much money that is. What a leap of faith in their vision. AT&T must be freaking sure they can turn this into profit fairly quick, because that is the kind of debt load that can kill a company, no matter how big.

10. Bernoulli

Posts: 4360; Member since: Sep 01, 2012

It's amazing that even though this transaction is massive it still falls short, after adjusted inflation, from what the Hershey company.

12. VZWuser76

Posts: 4974; Member since: Mar 04, 2010

I wonder if the deal would be approved. They just bought DirecTV not long ago. So they would be a service provider for mobile and landline telephone, internet, satellite TV, and then add to that a magazine, movie and television studios. With that much under their ownership, they could create their own reality distortion field! And you know with owning TV networks and movie studios, you're gonna start to see AT&T placement in shows and movies. Maybe the AT&T logo will replace the "S" on Superman's outfit when he comes back.

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