AT&T Inc. has reached an agreement to buy Time Warner Inc. for $85.4 billion in a deal that would transform the phone company into a media giant.
The wireless carrier agreed to pay $107.50 a share, evenly split between cash and stock. The companies said they expect the deal to close by the end of 2017.
AT&T Chief Executive Randall Stephenson would head the new company. The companies said Time Warner Chief Executive Jeff Bewkes would stay for an interim period following the close of the deal to help with the transition.
The telecommunications giant agreed on Saturday to buy Time Warner, the home of HBO and CNN, for about $85.4 billion, creating a new colossus capable of both producing content and distributing it to millions with wireless phones, broadband subscriptions and satellite TV connections.
The proposed deal is likely to spur yet more consolidation among media companies, which have already looked to partners to get bigger. This year, Lionsgate struck a deal to buy the pay-TV channel Starz for $4.4 billion. And the Redstone family, which controls both CBS and Viacom, has urged the corporate siblings, which split 10 years ago, to consider reuniting.
The wireless carrier agreed to pay $107.50 a share, evenly split between cash and stock. The companies said they expect the deal to close by the end of 2017.
AT&T Chief Executive Randall Stephenson would head the new company. The companies said Time Warner Chief Executive Jeff Bewkes would stay for an interim period following the close of the deal to help with the transition.
The combined business would pair the carrier’s millions of wireless and pay-television subscribers with Time Warner’s deep media lineup, which includes networks such as CNN, TNT, the prized HBO channel and Warner Bros. film and TV studio. It furthers AT&T’s bet that television and video can drive growth into a stalled wireless market.
“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,” Mr. Stephenson, 56 years old, said in a release.
The companies said they aim to be the first U.S. wireless company to compete nationwide with cable companies by providing an online-video bundle akin to a traditional pay-television package. “It will disrupt the traditional entertainment model and push the boundaries on mobile content availability for the benefit of customers,” the companies said.
Most analysts and investors have noted that Time Warner was part of one of the biggest merger follies of all time, when it sold itself to AOL at the height of the dot-com boom. That combination — also pitched on the idea of uniting content and the internet — proved unwieldy and was later stripped apart to a few core businesses.
This time, however, the rise of online outlets like Netflix, Amazon Prime and YouTube and the shift of younger customers from traditional media have pressured media companies to seek out consolidation partners. These media companies are anticipating drops in fees from cable service providers and declining revenue from advertisers. Getting bigger would give them more negotiating leverage with both service providers and with advertisers.
Competitors are likely to sound alarms about the scale of the combined company to possibly extract concessions during the review. Walt Disney Co. Chief Communications Officer Zenia Mucha said Saturday that “a transaction of this magnitude obviously warrants very close regulatory scrutiny.”
Mr. Stephenson added that Time Warner had created an “amazing franchise” by distributing its content to many distributors, and “we don’t imagine that changing.”
The talks began in August, when Mr. Stephenson paid a visit to Mr. Bewkes at Time Warner’s New York offices. “He came to talk to me about his view of distribution going forward, and my view of content,” Mr. Bewkes said in an interview after the deal was announced late Saturday. “He said, ‘conceptually it might make sense for us to combine. Should we investigate?’
“The biggest thing that we’re trying to do now is figure out what technology’s role is in distributing the great content that we have,” Robert A. Iger, Disney’s chief executive, said at a presentation at Boston College on Oct. 5.
Comcast’s takeover of NBC has proved a model for this new world of media deal-making. While the cable giant has occasionally been scrutinized for possible regulatory violations, NBCUniversal has generally thrived under its current ownership, with NBC enjoying a ratings comeback and Universal delivering a wide range of hit films, from blockbusters like “Jurassic World” to dramas like “Straight Outta Compton.”
Still, Time Warner’s deal with AT&T is likely to face tough scrutiny from government regulators increasingly skeptical of power being consolidated among a few titans. Donald J. Trump, the Republican nominee for president, indicated on Saturday that he would seek to block the merger if elected “because it’s too much concentration of power in the hands of too few.
Time Warner has experience in trying to marry internet and media assets before with its blockbuster cross-industry combination, the 2000 merger with AOL, which became a case study of what can go wrong in an ambitious deal.
Mr. Bewkes said a big difference from the AOL days is that distribution has become even more central to giving consumers what they demand from media—more flexibility in the packages they can buy, and the platforms they can accesses content from. “There’s more video going on mobile,” Mr. Bewkes said.
Mr. Bewkes said on the conference call Saturday night that he plans to stay on for “a reasonable period of time” after the deal closes, adding that he expected “basically all” of Time Warner’s business and creative executives to remain at the company for many years.
Now, Mr. Bewkes has found a suitor willing to offer significantly more — $107.50 a share in cash and stock — and done so at a time when media companies are under pressure to strike their own deals. AT&T’s offer represents a roughly 35 percent premium to where Time Warner’s stock was trading before news reports of the merger talks emerged.
“Time Warner chairman and C.E.O. Jeff Bewkes and his senior management team can see where the entire legacy media world is headed: secular decline,” Richard Greenfield, a media analyst at BTIG, wrote in a research note on Saturday.
Mr. Greenfield added, “We believe Bewkes will end up being remembered as the smartest C.E.O. in sector — knowing when to sell and not overstaying his welcome to maximize value for shareholders.”
The announcement on Saturday also affirms the ambitious deal-making of AT&T. One of the former so-called Baby Bells that arose from the 1982 breakup of the original AT&T, the company has spent hundreds of billions of dollars on acquisitions to reconstitute some of its parent’s empire.
For Time Warner, the deal represents a victory for Mr. Bewkes, 64, who took some heat from investors for rebuffing a takeover bid two years ago from 21st Century Fox at $85 a share. (21st Century Fox and Wall Street Journal-owner News Corp share common ownership.)
Time Warner has agreed to pay a $1.7 billion breakup fee if another company outbids AT&T’s offer, a different person familiar with the plans said. AT&T meanwhile would pay $500 million if the deal gets blocked, this person said.
AT&T will tap $40 billion in bridge loans, a person said, with $25 billion coming from J.P. Morgan Chase & Co. and $25 billion from Bank of America Merrill Lynch.
The wireless carrier agreed to pay $107.50 a share, evenly split between cash and stock. The companies said they expect the deal to close by the end of 2017.
AT&T Chief Executive Randall Stephenson would head the new company. The companies said Time Warner Chief Executive Jeff Bewkes would stay for an interim period following the close of the deal to help with the transition.
The telecommunications giant agreed on Saturday to buy Time Warner, the home of HBO and CNN, for about $85.4 billion, creating a new colossus capable of both producing content and distributing it to millions with wireless phones, broadband subscriptions and satellite TV connections.
The proposed deal is likely to spur yet more consolidation among media companies, which have already looked to partners to get bigger. This year, Lionsgate struck a deal to buy the pay-TV channel Starz for $4.4 billion. And the Redstone family, which controls both CBS and Viacom, has urged the corporate siblings, which split 10 years ago, to consider reuniting.
The wireless carrier agreed to pay $107.50 a share, evenly split between cash and stock. The companies said they expect the deal to close by the end of 2017.
AT&T Chief Executive Randall Stephenson would head the new company. The companies said Time Warner Chief Executive Jeff Bewkes would stay for an interim period following the close of the deal to help with the transition.
The combined business would pair the carrier’s millions of wireless and pay-television subscribers with Time Warner’s deep media lineup, which includes networks such as CNN, TNT, the prized HBO channel and Warner Bros. film and TV studio. It furthers AT&T’s bet that television and video can drive growth into a stalled wireless market.
“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,” Mr. Stephenson, 56 years old, said in a release.
The companies said they aim to be the first U.S. wireless company to compete nationwide with cable companies by providing an online-video bundle akin to a traditional pay-television package. “It will disrupt the traditional entertainment model and push the boundaries on mobile content availability for the benefit of customers,” the companies said.
Most analysts and investors have noted that Time Warner was part of one of the biggest merger follies of all time, when it sold itself to AOL at the height of the dot-com boom. That combination — also pitched on the idea of uniting content and the internet — proved unwieldy and was later stripped apart to a few core businesses.
This time, however, the rise of online outlets like Netflix, Amazon Prime and YouTube and the shift of younger customers from traditional media have pressured media companies to seek out consolidation partners. These media companies are anticipating drops in fees from cable service providers and declining revenue from advertisers. Getting bigger would give them more negotiating leverage with both service providers and with advertisers.
Competitors are likely to sound alarms about the scale of the combined company to possibly extract concessions during the review. Walt Disney Co. Chief Communications Officer Zenia Mucha said Saturday that “a transaction of this magnitude obviously warrants very close regulatory scrutiny.”
Mr. Stephenson added that Time Warner had created an “amazing franchise” by distributing its content to many distributors, and “we don’t imagine that changing.”
The talks began in August, when Mr. Stephenson paid a visit to Mr. Bewkes at Time Warner’s New York offices. “He came to talk to me about his view of distribution going forward, and my view of content,” Mr. Bewkes said in an interview after the deal was announced late Saturday. “He said, ‘conceptually it might make sense for us to combine. Should we investigate?’
“The biggest thing that we’re trying to do now is figure out what technology’s role is in distributing the great content that we have,” Robert A. Iger, Disney’s chief executive, said at a presentation at Boston College on Oct. 5.
Comcast’s takeover of NBC has proved a model for this new world of media deal-making. While the cable giant has occasionally been scrutinized for possible regulatory violations, NBCUniversal has generally thrived under its current ownership, with NBC enjoying a ratings comeback and Universal delivering a wide range of hit films, from blockbusters like “Jurassic World” to dramas like “Straight Outta Compton.”
Still, Time Warner’s deal with AT&T is likely to face tough scrutiny from government regulators increasingly skeptical of power being consolidated among a few titans. Donald J. Trump, the Republican nominee for president, indicated on Saturday that he would seek to block the merger if elected “because it’s too much concentration of power in the hands of too few.
Time Warner has experience in trying to marry internet and media assets before with its blockbuster cross-industry combination, the 2000 merger with AOL, which became a case study of what can go wrong in an ambitious deal.
Mr. Bewkes said a big difference from the AOL days is that distribution has become even more central to giving consumers what they demand from media—more flexibility in the packages they can buy, and the platforms they can accesses content from. “There’s more video going on mobile,” Mr. Bewkes said.
Mr. Bewkes said on the conference call Saturday night that he plans to stay on for “a reasonable period of time” after the deal closes, adding that he expected “basically all” of Time Warner’s business and creative executives to remain at the company for many years.
Now, Mr. Bewkes has found a suitor willing to offer significantly more — $107.50 a share in cash and stock — and done so at a time when media companies are under pressure to strike their own deals. AT&T’s offer represents a roughly 35 percent premium to where Time Warner’s stock was trading before news reports of the merger talks emerged.
“Time Warner chairman and C.E.O. Jeff Bewkes and his senior management team can see where the entire legacy media world is headed: secular decline,” Richard Greenfield, a media analyst at BTIG, wrote in a research note on Saturday.
Mr. Greenfield added, “We believe Bewkes will end up being remembered as the smartest C.E.O. in sector — knowing when to sell and not overstaying his welcome to maximize value for shareholders.”
The announcement on Saturday also affirms the ambitious deal-making of AT&T. One of the former so-called Baby Bells that arose from the 1982 breakup of the original AT&T, the company has spent hundreds of billions of dollars on acquisitions to reconstitute some of its parent’s empire.
For Time Warner, the deal represents a victory for Mr. Bewkes, 64, who took some heat from investors for rebuffing a takeover bid two years ago from 21st Century Fox at $85 a share. (21st Century Fox and Wall Street Journal-owner News Corp share common ownership.)
Time Warner has agreed to pay a $1.7 billion breakup fee if another company outbids AT&T’s offer, a different person familiar with the plans said. AT&T meanwhile would pay $500 million if the deal gets blocked, this person said.
AT&T will tap $40 billion in bridge loans, a person said, with $25 billion coming from J.P. Morgan Chase & Co. and $25 billion from Bank of America Merrill Lynch.
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