Summary: AT&T and Time Warner have set off on a path to merge the companies in an effort they claim will benefit consumers.
AT&T, a wireless, broadband and satellite TV giant is looking to merge their capabilities with a powerhouse in movies and television. In an official announcement by AT&T on Saturday, they stated their plan to buy Time Warner for $85 billion or $107.50 per share in a cash-and-stock deal.
Despite the fact that the two companies are in different primary industries with no direct competition between themselves, it is expected that they will face challenges from regulators. AT&T Chairman and CEO Randall Stephenson knows there will likely be concessions made to please regulators but that the deal is the natural evolution of the industry.
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“Why put the two companies together? Speed. The world of distribution and content is converging and we need to move fast and if we want to do something truly unique, begin to curate content differently, begin to format content differently for these mobile environments, and this is all about mobility.”
Time Warner Chairman and CEO Jeff Bewkes said in an interview with “Squawk Box” that consumers will have more choices with the result of the deal. Time Warner rejected an $80 billion bid two years ago by 21st Century Fox. Should Time Warner change their mind, they will have to pay a $1.7 billion termination fee. If AT&T decides to back out, they must pay Time Warner $500 million.
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Both companies see their move as the inevitable future of the market. Stephenson said, “To the extent that our strategy succeeds, I think other companies will try to look like us. And if our strategy doesn’t succeed, other companies won’t bother. So it’s a function of how well we do together in pulling the strategy off.”
AT&T bought DirecTV for $48.5 billion last year. They also plan to release a 5G mobile network that would be accelerated by the deal.
Do you think the companies should be allowed to merge? Tell us your thoughts on why the merger may not be allowed to go through.
To learn more about other major mergers recently, read Federal Trade Commission Blocks Staples, Office Depot Merger.
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