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AT&T to buy Time Warner for $85.4 billion in a cash and stock deal

AT&T Inc has reached an settlement in precept to purchase Time Warner Inc for about $eighty five billion, sources mentioned on Friday, paving the best way for what could be the most important deal on the earth this 12 months, giving the telecom firm management of cable TV channels HBO and CNN, movie studio Warner Bros and different coveted media belongings. The deal, which has been agreed on most phrases and could possibly be introduced as early as Sunday, can be one of many largest in recent times within the sector as telecommunications firms look to mix content material and distribution to seize clients changing conventional pay-TV packages with extra streamlined choices and on-line supply.


AT&T, which sells wi-fi cellphone and broadband companies, has already made strikes to show itself right into a media powerhouse, shopping for satellite tv for pc TV supplier DirecTV final yr for $forty eight.5 billion. It additionally in 2014 entered a three way partnership, Otter Media, with the Chernin Group to put money into media companies, and has rolled out video streaming companies. AT&T pays $a hundred and ten per Time Warner share in money and inventory, or about $eighty five billion general, sources informed Reuters. It might want to line up financing to pay for the deal, because it solely has $7.2 billion in money readily available. This might put stress on its credit standing because it already has $one hundred twenty billion in web debt as of June 30, in response to Moody’s.

Time Warner’s shares rose virtually eight p.c in common buying and selling, and an additional three.four % after hours, to $ninety two.50, giving it a market worth of about $seventy three billion. AT&T closed down three p.c at $37.forty nine. Time Warner is a serious pressure in motion pictures, TV and video video games. Its belongings embrace the HBO, CNN, TBS and TNT networks in addition to the Warner Bros movie studio, producer of the “Batman” and “Harry Potter” movie franchises. The corporate additionally owns a ten % stake in video streaming web site Hulu.

Time Warner Chief Government Jeff Bewkes rejected an $eighty billion provide from Twenty-First Century Fox Inc in 2014, however sources stated on Friday that the previous suitor had no plans to resume its bid. The Wall Road Journal reported on Friday that Apple Inc approached Time Warner just a few months in the past a few doable merger.

Content material and Distribution

Proudly owning extra content material offers cable and telecom firms bargaining leverage with different content material firms as clients demand smaller, hand-picked cable choices or swap to watching on-line. And new cellular know-how together with subsequent-era 5G networks might make a content material tie-up particularly enticing for wi-fi suppliers. “We expect 5G cell is coming, we predict 5G cellular is an epic sport-changer,” Wealthy Tullo, director of analysis at Albert Fried & Firm, mentioned in a word, including that cell suppliers could be in place to disrupt conventional pay-TV providers.

A earlier Time Warner blockbuster deal, its 2000 merger with AOL, is now thought of one of the vital in poor health-suggested company marriages on document. Dallas-primarily based AT&T and New York-primarily based Time Warner declined to remark. Cowen and Co analyst Doug Creutz questioned the technique of shopping for content material as an alternative of licensing it.

“What does it get them that they will’t get by licensing Time Warner content material and at a less expensive worth than shopping for the entire firm?” Creutz requested, noting it was unclear what financial savings might be gained “from stapling distribution and content material collectively. It’s been tried. It by no means works.” AT&T would possible be capable of win U.S. antitrust approval for the deal, some consultants mentioned, however regulators doubtless would put circumstances on approval, some consultants stated.

Andre Barlow, an antitrust lawyer on the regulation agency Doyle, Barlow and Mazard, stated the federal government might fear about whether or not different cable and web corporations would proceed to have entry to Time Warner content material like HBO and CNN. The U.S. Justice Division “will have a look at it however they received’t cease it,” mentioned Darren Bush, who teaches antitrust points on the College of Houston. Bush predicted regulators as a matter in fact would make a second request for info, which means the assessment would final a number of months.

The media business has been seen as ripe for consolidation, and several other shares rose on the information, together with Netflix Inc, which closed up about three.four p.c, and Discovery Communications Inc, which ended up three.6 p.c.

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