AT&T’s proposed $108.7 billion Merger with Time Warner


Overview of the deal

  • Acquirer: AT&T (NYSE: AT&T Inc)

  • Target: Time Warner (NYSE: TWX)

  • Estimated value: $85bn ($108.7bn including net debt)

  • Announcement date: 22/10/2016

  • Acquirer Advisors: JP Morgan, Bank of America Merrill Lynch

  • Target Advisors: Morgan Stanley, Citi AT&T and Time Warner are not direct competitors.

Combining the digital content distributor AT&T with the entertainment and news provider, Time Warner, would be a classical vertical merger. The telecommunications industry become vibrantly competitive and innovative following several technological disruptions that has forced older companies to adapt their business strategies. It is reasonable to assume that this vertical merger could lead to more efficiencies and synergies, hence benefiting both companies in this new environment.

For AT&T this deal is strategically very important to gain more data about its internet users and wireless subscribers. In addition, this deal could help AT&T more accurately target advertising to consumers and so compete more successfully with digital platforms such as Alphabet Inc.’s YouTube and Facebook Inc. However, in order to become the world's largest content and distribution company, AT&T has still to overcome opposition from the Department of Justice

The view presented here is that the government’s antitrust case has “little to no legal or economic basis”. They cite how traditional media companies have been losing ground to “new entrants and new forms of content”, that already utilise a vertically integrated business model. -Forbes

Company details (AT&T)

AT&T is a multinational conglomerate and the world's largest telecommunications company, serving 71 million customers.

- Founded in 1983 and headquartered in Dallas, United States

- President and CEO: Randall Stephenson (since 2007)

- Number of employees: 246,750

- Market Cap: $221.31bn - EV: $336.30bn

- LTM Revenue: $160.55bn - LTM EBITDA: $45.83bn

- LTM EV/Revenue: 2.20x - LTM EV/EBITDA: 7.61x

Company details (Time Warner)

Time Warner is a global leader in media and entertainment. The company has major operations in film and television and consists of three divisions, including HBO, Turner Broadcasting System and Warner Bros.

- Founded in 1990 and headquartered in New York City, United States

- CEO: Jeff Bewkes (since 2008)

- Number of employees: 25,000

- Market Cap: $72.07bn - EV: $93.23bn

- LTM Revenue: $31.30bn - LTM EBITDA: $8.61bn

- LTM EV/Revenue: 3.09x - LTM EV/EBITDA: 10.92x