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Game of Telecoms - AT&T Makes $85 Billion Pitch to Buy Time Warner

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USA based AT&T has announced a $85.4 billion takeover bid for the media company, Time Warner.

The move pitches AT&T into wider competition with Verizon which as itself been busy buying up media companies, including AOL, which once itself merged with Time Warner is one of the worst dot-com mania mergers in US history.

"This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers," said Randall Stephenson, AT&T chairman and CEO.

Owning content will help AT&T innovate on new advertising options, which, combined with subscriptions, will help pay for the cost of content creation.

This purchase price implies a total equity value of $85.4 billion and a total transaction value of $108.7 billion, including Time Warner's net debt. Post-transaction, Time Warner shareholders will own between 14.4% and 15.7% of AT&T.

The cash portion of the purchase price will be financed with new debt and cash on AT&T's balance sheet. AT&T has an 18-month commitment for an unsecured bridge term facility for $40 billion.

AT&T expects $1 billion in annual run rate cost synergies within 3 years of the deal closing. The expected cost synergies are primarily driven by corporate and procurement expenditures. In addition, over time, AT&T expects to achieve incremental revenue opportunities that neither company could obtain on a standalone basis.

Diversified revenue mix - Time Warner will represent about 15% of the combined company's revenues, offering diversification from content and from outside the United States, including Latin America, where Time Warner owns a majority stake in HBO Latin America, an OTT service available in 24 countries, and AT&T is the leading pay TV distributor.

Time Warner's business requires little in capital expenditures, which helps balance the higher capital intensity of AT&T's existing business. Time Warner's business is lightly regulated compared to much of AT&T's existing operations.

The merger is subject to approval by Time Warner shareholders and review by the U.S. Department of Justice. AT&T and Time Warner are currently determining which FCC licenses, if any, will be transferred to AT&T in connection with the transaction.

The transaction is expected to close before year-end 2017.

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Tags: at&t  time warner  USA