AT&T (NYSE: T) has agreed to acquire Time Warner (NYSE: TWX) in a stock-and-cash transaction valued at $107.50 per share, a mega-merger that combine AT&T's wireless, broadband and satellite TV services with Time Warner's vast portfolio, which includes the Warner Bros. movie studio and cable TV networks like CNN and HBO.
The 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. The agreement has been approved unanimously by the boards of directors of both companies.
Reports of a potential deal proliferated the headlines Friday, and investors seemed to like the idea—at least from Time Warner's perspective. TWX stock shot up from below $80 per share on Thursday to nearly $94 at one point, finishing the day at $89.48 per share and giving the company a market value of about $70 billion. AT&T stock, meanwhile, took a bit of a tumble after reports of an approaching deal, falling about 3% from end-of-day Thursday to finish the week at $37.49.
A successful close would create a company with a market cap of roughly $300 billion, dwarfing potential rivals such as Comcast (owner of NBCUniversal) and Disney (owner of ABC). It would also ostensibly create a whole new host of distribution outlets for Time Warner's catalog of content. For AT&T, adding Time Warner—particularly crown jewel HBO—to a portfolio that already includes DirecTV would, oddly, turn the 20th-century icon of telecommunications into a major player in the 21st century's shifting landscape of "television."
AT&T wasn't alone in its pursuit of Time Warner: Apple approached the company about a potential deal earlier this year, according to The Wall Street Journal.
So what made Time Warner such an attractive target? One fact is surely the company's move to become a leaner content carrier by divesting signature holdings such as Time magazine, AOL and Time Warner Cable, which was sold to Charter Communications for nearly $80 billion earlier this year.