AT&T-Time Warner mega-deal nearing completion

Posted at 5:41 PM, Oct 22, 2016
and last updated 2016-10-22 17:41:39-04

(CNN Money) — The boards of AT&T and Time Warner are meeting on Saturday afternoon to vote on an $80 billion deal that would bring the two companies together, according to sources familiar with the matter.

The acquisition of Time Warner could be announced by Saturday night.

The deal would be subject to a review by government regulators that could take more than a year.

Time Warner (TWX) is the parent company of CNN, TNT, HBO, the Warner Bros. studio, and a number of other TV channels and websites.

AT&T (T, Tech30), which dates back to the advent of the telephone in the late 1800s, is one of the country’s biggest providers of wireless phone and Internet service. It also recently acquired the DirecTV satellite TV business.

So AT&T-Time Warner is a union of programming and distribution.

Executives at the two companies have been in talks for several months. Word of the possible deal leaked out on Thursday; AT&T executives were said to be eager to finish the talks before the market opens on Monday morning.

According to the Wall Street Journal, the cash-and-stock deal values Time Warner at “between $105 and $110 a share.”
The two companies are declining to comment while talks are underway.

Why AT&T wants Time Warner

Adding Time Warner would help AT&T to diversify its business beyond wireless phone and Internet services. AT&T CEO Randall Stephenson has spoken publicly about his desire to own valuable programming.

Gaining Time Warner would give AT&T entry into entertainment, news and sports.

Time Warner includes everything from “Game of Thrones,” on HBO, to “Anderson Cooper 360,” on CNN, to “The Big Bang Theory,” produced by Warner Bros., to March Madness basketball games, aired by several Turner cable channels.

With HBO and CNN on one side of the company, and wireless on the other side, AT&T would have more power to shape the future of media.

The deal would also keep Time Warner out of the hands of AT&T’s huge rivals, including Verizon (VZ, Tech30), Comcast (CCV), and Apple (AAPL, Tech30).

A repeat of Comcast-NBC?

In some ways, the pending deal resembles Comcast’s 2011 acquisition of NBCUniversal. Comcast, a dominant cable distributor, wanted to own cable channels and a movie studio. That deal was approved, with restrictions, by regulators.

Donald Trump said earlier on Saturday that he would block the merger if elected president. He also said he would try to break up Comcast-NBC.
Hillary Clinton’s campaign has not commented.

AT&T-Time Warner would not be a “horizontal merger,” meaning two companies with similar businesses coming together and combining operations. Instead, it would be a “vertical merger,” placing two different kinds of businesses under the same roof.

A Time Warner acquisition by AT&T may start a new wave of consolidation and cause 21st Century Fox (FOX) and Disney to consider big deals of their own. To that end, shares of three other smaller cable programming companies — AMC, Discovery Communications and Scripps Networks — all surged on Friday.

CNNMoney’s Paul R. La Monica contributed to this report.