AT&T (NYSE:T) has bid $85.4 billion to purchase Time Warner (NYSE:TWX). Time Warner is getting $107.50 a share, with half of the deal in AT&T stock and half in cash. That is almost 40 percent more than investors thought the company was worth a week ago. Two years ago, Time Warner rebuffed a takeover bid from 21st Century Fox FOX at $85 a share.
The talks between AT&T and Time Warner began in August, with the boards of both companies eventually concluding that a merger made sense. AT&T CEO Randall Stephenson will run the combined company. Time Warner CEO Jeff Bewkes will stay on for an undefined transition period. Shares of AT&T fell 3 percent on reports of a deal in the works, while Time Warner rose nearly 8 percent.
The deal would transform the phone company into a media giant. The telecom company already owns a leading cellphone business, DirecTV and an internet service. Time Warner is the company behind HBO, CNN, and some of the world’s most popular entertainment channels. Time Warner also has the Warner Bros. film and TV studio.
Regulators would have to sign off on the deal. Former regulatory officials say there could be significant conditions placed on the merger. At the very least, transferring Time Warner’s licenses under the deal would require a review by the Federal Communications Commission. Mr. Stephenson said, “Any concerns by the regulators we believe would be adequately addressed by conditions.”
Critics warned of harm to consumers from the AT&T deal. The deal has already drawn fire in Congress and on the campaign trail. Minnesota Democrat Sen. Al Franken said the deal “raises some immediate flags about consolidation in the media market.” GOP presidential nominee Donald Trump vowed to kill the deal if elected.
This is just the latest big media acquisition by a major cable or phone company. For AT&T, the deal would be its biggest acquisition since paying $85 billion for BellSouth in 2006. AT&T purchased satellite-TV company DirecTV for $48.5 billion after its attempt to buy wireless competitor T-Mobile was scrapped in 2011. Comcast purchased NBC Universal in 2011 and bought movie studio DreamWorks Animation last August. Verizon bought AOL last year and is now trying to make a deal for Yahoo.
AT&T is counting on television and video to drive growth as growth has been slowing in wireless services and competition in wireless has increased. On Saturday the carrier released quarterly financial results that showed the loss of 268,000 mainstream wireless phone customers and 3,000 video business customers in the quarter. The company has lost almost 200,000 video customers since buying DirecTV last year.