AT&T Inc. is said to discuss takeover in Time Warner meetings. Executives are said to have met in recent weeks for informal talks. Time Warner has a market valuation of about $62 bn. Senior executives at AT&T Inc. and Time Warner Inc. have met in recent weeks to discuss various business strategies including a possible merger, as per people familiar with the matter. The talks at this stage are informal. They have focused on building relations between the firms rather than establishing the terms of a specific transaction. The people saying this also asked not to be identified as the deliberations are private. Neither side has yet hired a financial adviser, the people said.
AT&T Inc. Wants to be More than a Telecom Powerhouse
Acquiring Time Warner would give AT&T, one of the biggest providers of pay-TV and of wireless and home internet service in the U.S., a collection of popular programming to offer to subscribers, from HBO to NBA basketball to the Cartoon Network. AT&T CEO Randall Stephenson has been looking to add more content and original programming. This is as part of his plan to transform the Dallas-based telecommunications firm into a media and entertainment giant.
“There’s a lot that’s attractive about Time Warner,” media industry veteran Peter Chernin, who runs an online video joint venture with AT&T, said in an interview Thursday on CNBC. “I think they’re both great firms.” He said he didn’t know anything about a deal. Time Warner Chief Executive Officer Jeff Bewkes is a willing seller if he gets an offer he thinks is fair. This too was said by one of the people mentioned above. Bewkes and his board rejected an $85-a-share approach in 2014 from Rupert Murdoch’s 21st Century Fox Inc.. The latter had valued Time Warner at more than $75 bn.
Time Warner rose 4.7 percent to $82.99, valuing the firm at about $64.5 bn. AT&T fell 1.85 percent to $38.65. Representatives for both firms declined to comment. Time Warner shares had gained about 23 percent this year through Wednesday. They were boosted by sales gains at both its HBO premium channel and Turner cable-TV unit. AT&T Inc. is up by 11.26 percent in 2016, valuing the Dallas-based firm at about $237.9 bn. It has transformed itself over the last decade from a regional phone firm to a national telecom powerhouse. Its plan to focus on media and entertainment targets include firms worth $2 bn to $50 bn. This was said earlier this month by people familiar with the plans.
Its ESPN, Disney and now Time Warner for AT&T
Last year, AT&T paid $48.5 bn to acquire satellite-TV provider DirecTV, its biggest deal in at least 10 years, as per data compiled by Bloomberg. AT&T has been developing an internet-based version of the pay-TV service, called DirecTV Now. “With the pending launch of the DirecTV Now OTT app, it might make sense to move onto content ownership. But, Time-Warner is an awfully big first step into the content world,” said John Butler. John is an analyst at Bloomberg Intelligence and said this in an e-mail.
The results are mixed with blockbuster deals that bring outsiders into the media industry. Comcast Corp. has had a largely successful run since acquiring control of NBCUniversal in 2009. But Time Warner itself had one of the most disastrous mergers of all time. It had combined with America Online Inc. in 2000. With $7.2 bn of cash on hand, AT&T doesn’t have enough firepower to make a big deal with cash alone. In the wake of the DirecTV purchase and the $18 bn it spent in the federal airwave auction last year, AT&T’s net debt was $120 bn at the end of June.
Moody’s Investors Service calculates the firm’s adjusted leverage at 3.1 times earnings. It says the firm’s rating could be downgraded if it doesn’t stay on track to fall below 3 times. Right now the rating is three levels above junk.
AT&T had taken part in the 18th annual Pacific Crest Global Technology Leadership Forum. Pacific Crest Securities is the technology specialist of Keybanc Capital Markets. On the same day, Walt Disney Co. said networks including ESPN and the Disney Channel will be part of a new online video service planned by AT&T Inc. ‘s DirecTV division.