AT&T To Acquire Time Warner For $85.4 Billion Resulting In A Media Creation And Distribution Behemoth

In the media world, consolidation is the new name of the game and AT&T is trying to win it by making major acquisitions. It already purchased satellite TV provider DirecTV for $49 billion last year, and now it will look to gain regulatory approval to buy Time Warner for around $85.4 billion. Should the deal go through, AT&T would become one of the biggest multi-faceted media giants around.

Time Warner has been selling off bits and pieces of its business over the past decade, including Time Warner Cable, which Charter Communications acquired for $55 billion last year after a deal with Comcast was effectively derailed by the Federal Communications Commission over antitrust concerns. What remains of the company are still valuable assets, among them HBO, Warner Bros., DC Comics, and several notable cable channels such as CNN and Cartoon Network. It even has a 10 percent stake in Hulu.

Time Warner
Towers of Time Warner Center as seen from Tenth Avenue - Source: Wikimedia Commons (Beyond My Ken)

AT&T's bid amounted to $107.50 per share in cash and stock. That figure is about 35 percent higher than what Time Warner's stock was trading for before news of the takeover talks became public. It also served as validation to Time Warner CEO Jeffrey Bewkes' decision to turn down a buyout offer from 21st Century Fox for $85 per share two years ago. Bewkes felt the offer significantly undervalued his company, and now two years later, he can look at the pending AT&T deal as proof that he was right.

The deal was also unanimously approved by the board of directors for both companies.

"When Jeff and I started talking, it became clear to us very quickly that we shared a very similar vision," Randall L. Stephenson, AT&T’s chief executive, told reporters during a conference call on Saturday. "Time Warner, we believe, is the clear leader in premium content."

Though it's no small sum, the decision by AT&T was made easier by the fact that so much consolidation is taking place among major media companies. There aren't that many left. Comcast purchased NBCUniversal for $30 billion in 2009, while Lionsgate acquired pay-TV channel Starz for $4.4 billion earlier this year. And then you have companies like Verizon getting into the mix with its separate purchases of AOL and Yahoo.

This isn't the first time Time Warner has changed hands. AOL bought the media company in 2001 for $164 billion, a move that Bewkes would later call "the biggest mistake in corporate history." What's different about this sale is that streaming services like Netflix and Hulu have grown so popular. AT&T buying Time Warner gives it greater negotiating power, as well as the ability to produce and distribute content on its own.

Whether or not the deal goes through remains to be seen. While AT&T and Time Warner are gung-ho to get it done, not everyone feels the same way. Disney is one of them, saying a deal this large "warrants very close regulatory scrutiny," while Republican presidential candidate Donald Trump noted he would block the merger if elected "because it's too much concentration of power in the hands of too few."