AT&T Targets Time Warner in $86bn Super Deal


AT&T

Dallas based telecoms giant AT&T (NYSE:T) has announced that it plans to purchase entertainment group Time Warner Inc (NYSE:TWX) in an $86 billion dollar deal.

The deal described driven by the changing dynamics of the entertainment industry was described by AT&T’s chairman Randall Stephenson as a “perfect match’. It is seen as combining the complementary strengths of the two businesses.

The deal will see AT&T pay $107.50 for each Time Warner share in a cash and stock deal.

The deal will face tough scrutiny from industry regulators . Consolidation within the industry could is seen to reduce competition for consumers and consequently reduce their choice.

While the move could fall through, it is understood that ongoing talks could see some form of preliminary deal announced before Monday’s opening market bell.

AT&T is currently the third largest cable provider and owns the second largest wireless network in the US. This is seen as providing an established distribution network for media content produced by Time Warner.

Time Warner owns both CNN and HBO, brands which give access to a large amount of movies and television content. Key titles include the Harry Potter films and the highly popular ‘Game of Thrones’ title. Company revenues currently total around $28 billion per annum.

As the dynamics of the industry change, TV ratings are falling. Consumers are increasingly switching to pay per view and online on demand services. This is in preference to more traditional cable services. Only last week Netflix beat analysts’ expectations for subscriber growth for its streaming content service.

 It is thought that this latest move could spark further merger and acquisition activity within the sector. This latest announcement comes on the back of Rival Company Verizon recent purchases of AOL and Yahoo. These deals were driven by a similar desire to expand the accessibility of online digital content network.

AT&T Share Price

Outlook

At the closing bell on Friday AT&T stock price ended lower at $37.49 down 2.98% on the day.  Conversely stock in Time Warner Inc ended higher at 7.81%.

If the announcement is confirmed then the reaction of the market will be interesting to watch. Already much speculation surrounds the move and therefore taking a directional bias from a binary perceptive is difficult.

The success or otherwise of the deal will centre around how synergies between the two companies can be reconciled and the avenue for content distribution can be exploited.