Unic Press UK: AT&T Inc. and Time Warner Inc. announced on Saturday, the 22nd October that they have entered into a “definitive agreement under which AT&T will acquire Time Warner in a stock-and-cash transaction valued at $107.50 per share.”
The summary terms of the transaction and the benefits of the deal as declared by AT&T reads:
- Time Warner shareholders will receive $107.50 per share under the terms of the merger, comprised of $53.75 per share in cash and $53.75 per share in AT&T stock. The stock portion will be subject to a collar such that Time Warner shareholders will receive 1.437 AT&T shares if AT&T’s average stock price is below $37.411 at closing and 1.3 AT&T shares if AT&T’s average stock price is above $41.349 at closing.
- This purchase price implies a total equity value of $85.4 billion and a total transaction value of $108.7 billion, including Time Warner’s net debt. Post-transaction, Time Warner shareholders will own between 14.4% and 15.7% of AT&T shares on a fully-diluted basis based on the number of AT&T shares outstanding today.
- The cash portion of the purchase price will be financed with new debt and cash on AT&T’s balance sheet. AT&T has an 18-month commitment for an unsecured bridge term facility for $40 billion.
- Diversified revenue mix — Time Warner will represent about 15% of the combined company’s revenues, offering diversification from content and from outside the United States, including Latin America, where Time Warner owns a majority stake in HBO Latin America, an OTT service available in 24 countries, and AT&T is the leading pay TV distributor.
- Lower capital intensity — Time Warner’s business requires little in capital expenditures, which helps balance the higher capital intensity of AT&T’s existing business.
- Regulation — Time Warner’s business is lightly regulated compared to much of AT&T’s existing operations.
The new company is subject to approval by Time Warner Inc. shareholders and review by the U.S. Department of Justice.
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