AT&T Completes $85 Billion Purchase of Time Warner

It is the biggest media deal since the AOL-Time Warner merger, and a sign of how the media landscape has changed

AT&T Time Warner
AT&T Time Warner

AT&T Inc. has agreed to buy Time Warner Inc. in a cash-and-stock deal worth $85 billion, transferring ownership of one of Hollywood’s most treasured studios and transforming the 136-year-old telephone company into a massive multimedia giant.

The deal creates a distribution and content colossus of the digital age, bringing together premium assets including satellite TV provider DirecTV, cell phone network AT&T Wireless, the Warner Bros. movie and television studios and HBO and Turner cable channels under one, massive corporate roof.

AT&T will pay $107.50 per share of Time Warner, which values the transaction at $85.4 billion, according to a statement released by the companies on Saturday.

Randall Stephenson“This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers,” said Randall Stephenson, AT&T chairman and CEO. “Premium content always wins.”

He added: “With great content, you can build truly differentiated video services, whether it’s traditional TV, OTT or mobile.”

BEVERLY HILLS, CA - OCTOBER 06: Time Warner Inc. Chairman and CEO Jeffrey Bewkes speaks onstage during day one of TheWrap TheGrill 2014 at Montage Beverly Hills on October 6, 2014 in Beverly Hills, California. (Photo by David Buchan/Getty Images)
Time Warner Chairman and CEO Jeff Bewkes said, “This is a great day for Time Warner and its shareholders. Combining with AT&T dramatically accelerates our ability to deliver our great brands and premium content to consumers on a multiplatform basis and to capitalize on the tremendous opportunities created by the growing demand for video content.”

The deal is the largest media merger since AOL’s $165 billion purchase of Time Warner in 2000 — which did not work out so well. AOL took a $99 billion loss in 2003 as its internet business collapsed, and Verizon bought that  company for $4.4 billion last year. Time Warner hopes its second time as part of a mega-merger has a better result.

In fact, this deal most resembles Comcast’s 2011 purchase of a majority stake in NBCUniversal, which combined the country’s largest cable provider with another media company that also owned a handful of TV networks and a film studio. Regulators imposed a litany of conditions on the deal, which took more than a year from announcement to completion — which AT&T and Time Warner should expect to happen here as well.

Time Warner CEO Jeff Bewkes has streamlined the company in recent years, spinning off Time Warner Cable and AOL in 2009 and Time Inc. in 2014, choosing to focus on its cable channels and movie studio.

Both of those have had a resurgent 2016, which helped drive Time Warner’s stock up 28 percent year-to-date — before surging again on Friday as the deal appeared imminent. Warner Bros. placed third last year among major studios, with 14 percent market share, but is at 18 percent through Oct. 16 this year, trailing only Disney, which is on a record box office pace.

And CNN has seen its ratings soar as a result of 2016’s unpredictable and circus-like election, which has largely played out on cable news and social media. At the Goldman Sachs Communacopia conference in New York last month, Bewkes said CNN was having a “killer year.”

Meanwhile, AT&T has been transforming itself, building a diversified media company atop its telecom roots. Last year, it acquired satellite TV provider DirecTV for $49 billion, and since then, it’s been negotiating deals with content providers ahead of the launch of DirecTV Now, its planned over-the-top streaming offering.

Time Warner owns 10 percent of Hulu, which is planning its own standalone streaming service — and would give AT&T an economic interest in what should be another significant player in streaming. That’s significant because like every other pay TV provider, AT&T has had to deal with subscriber losses stemming from cord-cutting.

And by adding Time Warner’s programming — not just its new hits like HBO’s “Game of Thrones” but Warner Bros. extensive library — AT&T now owns a lot more premium content to run through its distribution channels, from satellite TV to home streaming to mobile video.