AT&T–Time Warner Acquisition

Abstract

The modern AT&T network is the largest communication company in the world. AT&T is a fully integrated service provider which provides advanced mobile services, next-generation TV, high-speed Internet, and sm solutions. On October 22, 2016, AT&T entered into an agreement to acquire Time Warner. The deal combined Time Warner’s vast resource of library of premium content for audiences around the world with the extensive distribution strength of AT&T in terms of world’s largest pay-TV subscriber bases and scale in TV, mobile, and broadband distribution. The combination of Time Warner’s premium content with AT&T’s customer relationships across mobile, TV, and broadband networks was expected to facilitate AT&T to emerge as the global leader in the converging telecom, media, and technology industry sector. It was a strategic initiative to use premium content on television and video to foster growth into a stalled wireless market. AT&T expects to emerge as the first wireless company to compete with cable companies by providing an online video bundle akin to a traditional pay television package. AT&T paid $107.50, a share evenly split between cash and stock. The deal was valued at approximately $85.4 billion as of the date of the announcement. AT&T expected $1 billion in annual run rate cost synergies within 3 years of the deal closing. The expected cost synergies were primarily driven by corporate and procurement expenditures. The cumulative returns for AT&T for 247 days (−10 to 236 days) surrounding the merger announcement period was 1.3%. The stock price of Time Warner has shown increasing trend during the 247-day period surrounding the acquisition announcement. The cumulative returns for the time period of 247 days (−10 to 236 day) was approximately 26%.