AT&T's BellSouth Acquisition: An Overview (T, BLS)

AT&T announced its intent to acquire BellSouth yesterday. According to the company's press release, BellSouth shareholders will receive 1.325 shares of AT&T stock for each BellSouth share. This translated into $37.09 per BellSouth share on March 3 closing prices (17.9% premium), or $67 billion. The deal is expected to close within twelve months. According to CEO Edward Whitcare:

This merger is a logical next step that creates substantial value for customers and stockholders of both AT&T and BellSouth. It will benefit customers through new services and expanded service capabilities. It will strengthen Cingular through unified ownership and a single brand. And we are confident that this is a merger we can execute, based on our track record with previous integrations and our experience working closely with BellSouth to create and build Cingular Wireless, and operate Yellowpages.com.

Benefits to Each Side:
The WSJ outlines the key benefits to AT&T and BellSouth in the graphic on the right. According to the press release, AT&T sees "an expected net present value of $18 billion in synergies resulting from a more than $2 billion annual run rate in synergies expected in 2008, growing to $3 billion in 2010". Consolidation of Cingular Wireless is one of the key drivers of the acquisition; according to the WSJ:

Having one owner could help Cingular quickly roll out new services and to integrate the sales and marketing of the new company's regular and wireless offerings, which will likely be sold under the AT&T brand. Eventually, AT&T and Cingular could offer advanced options such as a single voice-mail service for both types of phones or the ability to transfer video content from TVs to cellphones, says Julie Ask a research analyst at Jupiter Research. For years, BellSouth has operated as a kid brother to Mr. Whitacre's much larger, faster-moving company. At BellSouth, Mr. Ackerman, who is slated to retire next year, has focused on returning dividends to investors rather than spending money on innovations.