AT&T settles for $85.4 billion in Time Warner's acquisition deal
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The giant wireless and PayTV provider confirmed the hefty price tag of the HBO's and CNN's owner buyout, opening a new audience of millions for the Time Warner's content.

AT&T (ICE Europe: Futures On WTI Crude Oil Mar 2017 [T]), one of the largest telecommunications companies in the U.S., has added the next big deal in the pocket of the media industry. AT&T-Time Warner deal follows Comcast's (NASDAQ: Comcast Corporation [CMCSA]) $30 billion acquisition of NBCUniversal, yet another media and entertainment giant, as well as Verizon's (NYSE: Verizon Communications [VZ]) Yahoo and Huffington Post takeovers. Time Warner, one of the remaining and most expensive "jewels" on the media table, joined the race of the major industry players trying to keep up with the shift of the audience's attention from the cable networks to streaming services like Netflix (NASDAQ: Netflix [NFLX]) and Amazon Prime (NASDAQ: Amazon.com [AMZN]).

The deal was closed on Saturday after AT&T's and Time Warner's (NYSE: Time Warner [TWX]) management agreed upon the $85.4 billion acquisition price that included a compensation of $107.50 per share, equally split between stock and cash. As a result of the deal, Time Warner shareholders will get roughly 1.44 AT&T shares, if the stock price goes lower than $37.4 at closing, or 1.3 AT&T shares, if the stock price is above $41.35, says the press release. The buyout deal will have an equity value of $85.4 billion and a total transaction value of $108.7 billion covering Time Warner's net debt. After the transaction is completed, Time Warner shareholders will get around 15% of AT&T shares on a fully-diluted basis, reports BusinessWire. The deal is expected to be closed by the end of the next year.

In addition to that, AT&T plans to generate about $1 billion in annual cost synergies within the first 3 years after the acquisition and generally expects revenue improvements that "neither of the company could obtain on a standalone basis". The New York Times reports that the management boards of the two companies unanimously supported the deal:

“When Jeff and I started talking, it became clear to us very quickly that we shared a very similar vision. Time Warner, we believe, is the clear leader in premium content,” AT&T's CEO Randall Stephenson, said in the call on Saturday referring to Time Warner's CEO.

The $85.4 billion deal will open the door to a completely new company capable of both producing and distributing original content to the audience of millions. AT&T's mobile network covers over 315 million customers in the U.S. alone as well as provides broadband subscription and satellite TV in the U.S., Mexico and Latin America, what creates a large distribution network for Time Warner's content.

At the same time, Time Warner can bring a rich content portfolio that comes from the company's 3 operating divisions: Turner, HBO and Warner Bros. Turner includes American and global cable networks such as TNT, CNN, Cartoon Network as well as sports right for NBA channeling. The second division, HBO, is a premium PayTV that features the world's leading original series such as Game of Thrones among others. Whereas Warner Bros. Entertainment is a television and film franchise, owning the rights for Harry Potter, The Big Bang Theory, The Voice and DC Entertainment. The company says that all 3 divisions are leading in their specific segments.

“Premium content always wins. It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen. We’ll have the world’s best premium content with the networks to deliver it to every screen. A big customer pain point is paying for content once but not being able to access it on any device, anywhere. Our goal is to solve that. We intend to give customers unmatched choice, quality, value and experiences that will define the future of media and communications," said Stephenson on Saturday.

Therefore, considering the large portfolio of the leading shows and networks as well as the scale of available distribution, the AT&T-Time Warner deal raised a heated debate among the politicians and industry players. The $85.4 billion "blockbuster" deal, as the Wall Street Journal calls it, was the first thing on today's agenda of the U.S. antitrust authorities that were asked to investigate the issue of monopolization in the media industry that the deal could potentially bring about.

Even Mr. Trump has spoken about the AT&T-Time Warner merger before it was announced, saying that that deal is "too much concentration of power in the hands of too few"and he, if elected as a president, would not approve it. Another prominent political figure Bernie Sanders, a former presidential candidate, urged the administration to "kill" the merger as he worried about the deal's monopolization consequences.

While AT&T Chief claimed that the regulators should not view the deal as potentially dangerous for the industry because, in his opinion, the partnership between the content provider and a distributor would not worsen the media industry concentration in any way. He added that Time Warner's media subdivisions would continue functioning autonomously, referring to the concerns about compromising CNN's editorial independence as a result of the merge.

“It is going to have to go through a regulatory review process that is dictated by rules, regulations and laws. I can’t control what the politicians say and feel about it,” Stephenson said in an interview, as reported by the WSJ.

That is why, it is still unclear whether the blockbuster deal will actually happen, despite the AT&T's CEO assurance, as too many political, industry and regulatory voices are speaking against it. It is clear that the merger could bring unparalleled profits for the AT&T and Time Warner network but also threaten the very existence of the smaller players in the less and less competitive American media & entertainment industry.

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