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AT&T Is Said to Be in Advanced Merger Talks With Time Warner AT&T Is Said to Be in Advanced Merger Talks With Time Warner
(about 3 hours later)
AT&T is in advanced talks to acquire Time Warner, according to three people briefed on the discussions, a deal that could be the largest in the United States this year.AT&T is in advanced talks to acquire Time Warner, according to three people briefed on the discussions, a deal that could be the largest in the United States this year.
The transaction is not yet final and may fall apart, said the people, who asked not to be named discussing private information. The transaction is not yet final and may fall apart, said the people, who asked not to be named discussing private information. Time Warner is seeking more than $90 a share, two of the people said.
Shares of Time Warner rose 9 percent in heavy trading Thursday afternoon after Bloomberg News reported the discussions. On Friday, its shares were up 8 percent, while AT&T shares were down nearly 3 percent.
With the recent run-up in its stock price, Time Warner has a stock market value of nearly $73 billion. AT&T is much larger, with a market value of $231 billion.
The apparent interest in Time Warner comes more than two years after AT&T announced a $48.5 billion deal for DirecTV, the nation’s largest satellite television provider. The merger created the country’s largest television distributor with about 26 million subscribers, surpassing Comcast.The apparent interest in Time Warner comes more than two years after AT&T announced a $48.5 billion deal for DirecTV, the nation’s largest satellite television provider. The merger created the country’s largest television distributor with about 26 million subscribers, surpassing Comcast.
Another large acquisition would be very difficult for AT&T to digest. The company has a debt load of about $130 billion, with just $7 billion in cash on hand. Another large acquisition would be very difficult for AT&T to digest. The company has a debt load of about $130 billion, with just $7 billion in cash on hand. It could also raise antitrust concerns with regulators, who have quashed several deals this year because of competition issues.
With its wireless business facing limits to growth and television challenged more broadly, AT&T has sought to diversify through video content. Analysts have said it may pursue acquisitions to achieve that strategy.With its wireless business facing limits to growth and television challenged more broadly, AT&T has sought to diversify through video content. Analysts have said it may pursue acquisitions to achieve that strategy.
Distributors like AT&T, Verizon Communications and Comcast have been either investing or buying companies that produce the content to gain control over their customers’ entertainment experiences. By purchasing DirecTV, AT&T obtained the rights to N.F.L. Sunday Ticket, giving customers access to every football game. The company also created a joint venture in 2014 with the Chernin Group to invest in media businesses and start internet streaming video services.Distributors like AT&T, Verizon Communications and Comcast have been either investing or buying companies that produce the content to gain control over their customers’ entertainment experiences. By purchasing DirecTV, AT&T obtained the rights to N.F.L. Sunday Ticket, giving customers access to every football game. The company also created a joint venture in 2014 with the Chernin Group to invest in media businesses and start internet streaming video services.
Still, AT&T has historically been less aggressive than its peers in building out a content empire. Verizon recently agreed to acquire Yahoo for $4.8 billion — AT&T was also a bidder and lost. Verizon also acquired AOL last year for $4.4 billion. Still, AT&T has historically been less aggressive than its peers in building a content empire. Verizon recently agreed to acquire Yahoo for $4.8 billion — AT&T was also a bidder and lost. Verizon also acquired AOL last year for $4.4 billion.
Comcast owns NBC Universal and has a stake in newer digital media properties, including Buzzfeed and Vox. Earlier this year, Comcast’s NBC division agreed to acquire DreamWorks Animation, which produced the “Shrek” and “How to Train Your Dragon” movies, for $3.8 billion.Comcast owns NBC Universal and has a stake in newer digital media properties, including Buzzfeed and Vox. Earlier this year, Comcast’s NBC division agreed to acquire DreamWorks Animation, which produced the “Shrek” and “How to Train Your Dragon” movies, for $3.8 billion.
Shares of Time Warner rose 9 percent in heavy trading Thursday afternoon after Bloomberg News reported the discussions. On Friday, its shares were up 8 percent, while AT&T shares were down nearly 3 percent.
With the recent run-up in its stock price, Time Warner has a stock market value of nearly $70 billion. AT&T is much larger, with a market value of $231 billion.
An army of executives and advisers are working to strike a deal over the weekend, trying to get an announcement out before the markets open on Monday, according to two of the people with knowledge of the deal. The talks have been taking place for several months and became serious in recent weeks.
Acquiring Time Warner would greatly enhance AT&T’s portfolio of content, something that is increasingly valuable with the popularity of streaming, especially if AT&T could control how it is distributed, Amy Yong, an analyst with Macquarie, said in a note.
Time Warner would add a 10 percent stake in the streaming service Hulu, HBO’s traditional network and streaming service, the Turner cable TV networks and Warner Bros. film and television studios.
“This could help its competitive positioning to not only traditional carriers Verizon, T-Mobile and Sprint but also emerging players Comcast, Netflix and Hulu,” Ms. Yong said.
Two years ago, AT&T started a joint venture with the Chernin Group, a production and digital media holding company, called Otter Media with more than $500 million in funding to acquire, invest and start online video businesses. Those companies include Fullscreen, Ellation and Gunpowder & Sky.
AT&T also is expected to start three new streaming services later this year and has struck deals with a number of media companies to create a pipeline of content.
Time Warner also is attractive because it is not controlled by a family shareholder, said Omar Sheikh, an analyst with Credit Suisse.
“With no blocking/family shareholder, control over a leading film and TV studio, plus valuable sports and drama networks, Time Warner is the partner of choice if any consolidation is to take place in U.S. media in our view,” Mr. Sheikh said.
But several analysts pointed out high hurdles for the combined company to get regulatory approval from the Federal Communications Commission and the Department of Justice. One major concern, they said, was the potential harmful effects for consumers of combining a content owner with a distributor, including the fears that the combined company would increase prices, withhold content or harm new competition.
Some analysts are skeptical that AT&T and Time Warner would actually reach a deal.Some analysts are skeptical that AT&T and Time Warner would actually reach a deal.
AT&T has said its “plate is full” in absorbing DirecTV, Mike McCormack, an analyst with Jefferies, said in a note. He also pointed out the high hurdles for the combined company to get regulatory approval from the Federal Communications Commission. AT&T has said its “plate is full” in absorbing DirecTV, Mike McCormack, an analyst with Jefferies, said in a note.
Today’s Time Warner is the byproduct of many rounds of spinoffs and acquisitions, dating back to 1989, when Time Inc. merged with Warner Communications, then creating the largest media conglomerate in the world, with cable, publishing and movie assets. Seven years later, the company acquired Turner Broadcasting, bringing the cable network CNN under its wing.Today’s Time Warner is the byproduct of many rounds of spinoffs and acquisitions, dating back to 1989, when Time Inc. merged with Warner Communications, then creating the largest media conglomerate in the world, with cable, publishing and movie assets. Seven years later, the company acquired Turner Broadcasting, bringing the cable network CNN under its wing.
In 2000, Time Warner merged with AOL, a combination that has since been seen as one of the largest mistakes ever made in deal making. After the dot-com bubble burst, the value of AOL declined significantly and the company had to write off a $99 billion loss. Time Warner later decided to spin off AOL.In 2000, Time Warner merged with AOL, a combination that has since been seen as one of the largest mistakes ever made in deal making. After the dot-com bubble burst, the value of AOL declined significantly and the company had to write off a $99 billion loss. Time Warner later decided to spin off AOL.
It spun off the cable operations in 2009, and two years ago, the company spun off Time Inc., comprising publishing properties like Time magazine and Fortune.It spun off the cable operations in 2009, and two years ago, the company spun off Time Inc., comprising publishing properties like Time magazine and Fortune.
Today, Time Warner’s units include such premium channels as HBO and Cinemax, as well as Turner, which operates TBS, Turner Sports and others, in addition to CNN. Time Warner also runs Warner Brothers Entertainment, which created movies like “Sully,” “Storks” and “Suicide Squad.” Today, Time Warner’s units include such premium channels as HBO and Cinemax, as well as Turner, which operates TBS, Turner Sports and others, in addition to CNN. Time Warner also runs Warner Bros. Entertainment, which created movies like “Sully,” “Storks” and “Suicide Squad.”
In June 2014, Rupert Murdoch’s 21st Century Fox offered to buy Time Warner for $85 a share in stock. Time Warner spurned that offer, saying that it could create more value for shareholders by staying independent. Mr. Murdoch withdrew the offer that August.In June 2014, Rupert Murdoch’s 21st Century Fox offered to buy Time Warner for $85 a share in stock. Time Warner spurned that offer, saying that it could create more value for shareholders by staying independent. Mr. Murdoch withdrew the offer that August.
In the last two years, Time Warner has been under pressure to show that it could create that value especially amid uncertainty about the future of traditional television in a digital media world. Time Warner’s stock price closed at $79.24 on Wednesday, before news of the potential AT&T deal. That’s up about 4 percent from two years ago.