AT&T Inc agrees to buy Time Warner Inc for 85.4 billion US dollars

AT&T Inc on 22 October 2016 agreed to buy Time Warner Inc for 85.4 billion US dollars in a deal that will transform the phone company into a media giant.

AT&T agreed to pay 107.50 US dollars a share, evenly split between cash and stock. The deal is expected to close by the end of 2017.

Highlights of the Deal
• The new company will be headed by AT&T Chief Executive Randall Stephenson.
• Time Warner Chief Executive Jeff Bewkes will stay for an interim period following the close of the deal.
• AT&T will tap 40 billion US dollars in bridge loans with 25 billion US dollars coming from JP Morgan Chase & Co and 15 billion US dollars from Bank of America Corp.
• Time Warner agreed to pay a 1.7 billion US dollars breakup fee if another company outbids AT&T’s offer. AT&T, meanwhile, would pay 500 million US dollars if the deal gets blocked.
• Once the deal is completed, AT&T will rely on its entertainment business for more than 40 percent of its revenue, based on second-quarter financial results.

The combined business will pair AT&T's millions of wireless and pay-television subscribers with Time Warner’s deep media lineup, which includes networks such as CNN, TNT, the prized HBO channel and Warner Bros and TV studio.

Background
The talks of this acquisition began in August 2016, when AT&T Chief Executive Stephenson visited Time Warner’s New York office. Since then, both the sides continued discussing the possibilities with each other.

For AT&T, the deal will help the carrier potentially find new areas of growth as its core wireless business has become saturated. The carrier lost 268000 mainstream wireless phone customers and its video business lost a net 3000 customers in the quarter.

The company lost almost 200000 video customers since buying satellite television provider DirecTV last year.