A Quick Guide to AT&T’s M&A Dance With Time Warner

AT&T-Time Warner Gets Done With Provisions: Gamco

AT&T Inc., the second-largest U.S. wireless provider, has agreed to acquire Time Warner Inc., owner of HBO and CNN, for $85.4 billion.

Why does AT&T want to buy Time Warner?

AT&T wants to produce and own TV shows, movies and other video to distribute to its pay-TV and mobile customers. Rivals Comcast Corp. and Verizon Communications Inc. have taken similar approaches. Comcast, the largest U.S. cable provider, acquired TV and movie maker NBCUniversal while Verizon, the biggest mobile provider, purchased AOL and agreed to buy the main internet businesses of Yahoo! Inc.

Time Warner is one of the largest producers of premium TV shows and movies in the world. It owns Warner Bros., the film and TV studio, Turner Broadcasting, owner of cable networks TBS, TNT and CNN, and HBO, the largest premium cable network in the U.S.

AT&T thinks it can use shows like “Game of Thrones” and “The Big Bang Theory” to boost its other businesses. Dallas-based AT&T acquired DirecTV for $48.5 billion two years ago, making it the largest pay-TV provider in the U.S.

How much will this deal cost?

The AT&T-Time Warner transaction is valued at $108.7 billion including Time Warner’s net debt. AT&T would pay $107.50 a share, using a combination of cash and stock. That’s a big chunk of change even for Ma Bell, which already has $120 billion in debt, including obligations from buying DirecTV.

Is this a good deal for Time Warner?

Time Warner investors are happy. The shares rose as much as 14 percent to $94.44 on Friday, after news of the potential deal. That’s the highest level since 2001. AT&T will pay more than 21st Century Fox Inc. offered for Time Warner in 2014.

Will this spur another wave of media acquisitions?

Shares of other media companies, such as Discovery Communications Inc., Scripps Networks Interactive Inc. and AMC Networks Inc., rose after news of the Time Warner deal broke. Analysts and investors have long argued that these businesses would be better off as parts of larger enterprises.

Consolidation in the pay-TV business, such as Charter Communication Inc.’s acquisition of Time Warner Cable Inc., had already renewed speculation about potential media deals.

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