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Time Warner, once the biggest, most successful media company in the world, just agreed to sell itself to phone giant AT&T for around $80 billion.
As part of the deal, which may be confirmed on Saturday night by the companies’ boards, AT&T will house Time Warner’s news network CNN, pay TV provider HBO and film and TV studio Warner Bros. Entertainment.
The news is a stunner, in part because Time Warner, run by CEO Jeff Bewkes, did not end up in a tense auction. Instead, the New York-based programmer was sold with a whimper to a single buyer, which only emerged as a serious bidder for the company on Friday.
The frenetic sales process did not attract Apple with a blank check as some insiders had expected. Neither Google nor Amazon had a passing interest.
AT&T had been eyeing the company for more than a year. Time Warner last received a bid from 21st Century Fox in July 2014 worth $85 per share, but was turned down with the company saying it wanted to remain independent.
The AT&T deal gives Time Warner shareholders, who lost their shirts after the disastrous Time Warner/AOL merger in 2000 — a reward for their patience.
The agreement is worth between $105 and $108 a share and is half cash and half stock with just a $500 million break-up fee to AT&T if the agreement doesn’t stick.
Before news of the deal, which sent Time Warner’s stock skyrocketing, its market capitalization was $68 billion. Shares closed at $89.48 on Friday, giving it a market cap of $72.9 billion.
“AT&T has validated that Time Warner’s assets are worth more than where the public markets view them,” said entertainment analyst Rich Greenfield of BTIG, who also suggested Time Warner management may view a tricky future for standalone content players.
“If Time Warner and its management team were confident in the future of the media sector, particularly the cable network industry, they would not be selling now,” Greenfield added.
Time Warner isn’t the only mega-media merger in play. CBS and Viacom have also hired banks to explore a merger. The two are former corporate siblings.
The new partnership is a game changer in the fast growing world of over-the-top (internet delivered) mobile video. A host of players are fighting to replicate the cable channel bundle in an online world.
The hope is that consumers will be attracted to whomever can offer them the best entertainment mix.
On the campaign trail, Presidential candidate Donald Trump said he would kill the proposal if he reaches the White House.
The Republican nominee said it was a “deal we will not approve in my administration because it is too much concentration of power in the hands of too few,” adding, “Deals like this destroy democracy.”
