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Reuters: AT&T to Acquire Time Warner for $85 Billion

21 Oct, 2016 By: Erik Gruenwedel



AT&T has reportedly agreed in principle to acquire media giant Time Warner for $85 billion, according to Reuters, which cited sources familiar with the transaction. The deal, which could be formally announced over the weekend, would be $10 billion above what Rupert Murdoch’s 21st Century Fox offered for Time Warner in 2014. The Time Warner board and CEO Jeff Bewkes rejected that bid.

Unlike the Fox offer, which would have resulted in significant duplication of movie, TV and pay-TV assets, AT&T remains largely a telecommunications company. Following its acquisition of satellite operator DirecTV for $49 billion, AT&T is using the brand to launch standalone subscription streaming service DirecTV Now in the fall.

While AT&T has grown distribution, it lacks content (and creation) on a grand scale. With Comcast acquiring NBC Universal (including NBC TV and Universal Studios) for TV shows and movies, AT&T would get industry heavyweights HBO (and HBO Now), Turner (TBS, TNT and CNN networks) and Warner Bros., whose assets include Warner Bros. Television, Warner Bros. Home Entertainment and a 10% stake in Hulu.

In 2014, Otter Media, a venture between The Chernin Group and AT&T, purchased a majority stake in Fullscreen, a global online media company.

That said, merger between AT&T and Time Warner could present regulatory issues, according to analyst Craig Moffet with MoffetNathanson.

“A [telecom company] owning content is something that was expressly prohibited for a century by the government,” Moffett told the Washington Post, “and even now, it raises all kinds of unique questions.”

Doug Creutz, analyst with Cowden and Co., questions AT&T buying, versus licensing from, a content creator.

“What does it get them that they can't get by licensing … at a much cheaper price?” Creutz asked.

Time Warner is no stranger to mega mergers. In 2000, at the height of the dotcom era, the company agreed to be acquired by online pioneer AOL for $164 billion. That deal — considered one of the worst M&A transactions in history — quickly soured due to competing corporate cultures and the 2002 burst of the dotcom bubble (and subsequent advertising falloff), which saw AOL write off nearly $99 billion in losses. 

Today, AOL is owned by Verizon, which acquired it and rival dotcom pioneer Yahoo last year for $4.4 billion and $4.8 billion, respectively.


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