Will AT&T-Time Warner Acquisition Close This Year?
Last year in October, telecom giant AT&T (T) agreed to acquire the media and entertainment behemoth Time Warner (TWX) for $85.4 billion. While the US Department of Justice (or DOJ) hasn’t approved the deal yet, the deal received clearance from Brazil (EWZ), Chile, and Mexico. AT&T’s CEO, Randall Stephenson, had been confident that the deal would close by the end of this year. However, on November 8, AT&T chief financial officer, John Stephens, stated that the timing of the deal closure is “now uncertain.” Further, according to the New York Times, the DOJ is persuading AT&T to sell significant assets to acquire Time Warner. The news has raised doubts about the completion of the deal and pulled Time Warner stock down by over 6% on November 8.
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Terms of the deal
According to the terms of the transaction, Time Warner’s shareholders will receive $107.50 per share, consisting of both cash and AT&T stock. The deal values the company at $108.7 billion including Time Warner’s net debt. After the completion of the deal, their shareholders will gain ownership of about 14.4% to 15.7% of AT&T stock, as of October 22, 2016. AT&T will finance the deal with its available cash and new debt.
After completion of the deal, AT&T expects the merger to be accretive to both adjusted profits and free cash flow in the first year. The company also anticipates generating annual cost synergies of about $1 billion within the first three years of the merger.
Deal can boost AT&T’s revenues
The $85.4 billion mega-merger won’t just give premium content to AT&T but would also help the company boost its revenues. Time Warner has generated significant revenues in the past due to its substantial business operations. Time Warner’s top line stood at $29.3 billion in 2016, up from $28.1 billion a year ago. Time Warner also performed impressively in 3Q17, beating its top-line and bottom-line expectations.