39% Annualized Return And AT&T
Chris DeMuth Jr. • 175 Comments
Chris DeMuth Jr. • 175 Comments
Fri, Dec. 2, 9:01 AM
- Candidate Donald Trump was strongly against the AT&T (NYSE:T)/Time Warner (NYSE:TWX) tie-up, but president-elect Trump's transition team has reassured T that its deal will be evaluated without prejudice, reports the FT.
- AT&T is encouraged by appointments to the transition team of two former competition officials with a history of hands-off attitude on antitrust. Talks with the team have AT&T believing its purchase will pass regulatory muster.
- University of Michigan professor Erik Gordon says he expects a Trump administration to turn tough on deals only when they might result in job losses. Gordon: “The Obama administration seemed to have an almost gut, visceral dislike of big powerful companies. I think the Trump administration doesn’t have that."
Thu, Dec. 1, 1:57 PM
Tue, Nov. 22, 10:12 AM
- Although the President-elect has railed against companies like NBCUniversal and Amazon for being too big, the advisers Trump named to help oversee his FCC and DOJ transitions have a history of being very pro-industry and anti-regulation, particularly when it comes to mergers.
- That could be good news for AT&T's (T +0.9%) $85B bid for Time Warner (TWX +0.8%), despite what Trump has said on the campaign trail.
- Jeff Eisenach has supported major media mergers proposed in recent years, while Mark Jamison argued in favor of the AT&T and T-Mobile tie-up, although in the end the FCC declined to approve the deal.
- Of Trump's three new advisers for the transition of DOJ - J. Patrick Rowan, Jessie Liu and Ronald Tenpas - none specialize in M&A, but all three have extensive experience in helping large companies navigate the U.S. regulatory landscape. Rowan has also helped counsel at least one sale of a U.S. telecom company to a foreign buyer.
Fri, Nov. 18, 12:14 PM
- The president-elect intends to nominate Alabama Senator Jeff Sessions as the next Attorney General. While the immediate focus (in much of the media) seems likely to be his hardline stance against illegal immigration, Evercore ISI's Terry Haines says the choice means an immediate shift from the "red light" antitrust policy of the Obama administration.
- Source: Bloomberg
- That, of course, would be of particular interest to AT&T (NYSE:T) and Time Warner (NYSE:TWX), as well as Bayer (OTCPK:BAYRY) and Monsanto (NYSE:MON).
Thu, Nov. 17, 7:49 PM
- Speculation about the chances for approval of AT&T's (T +0.7%) $85B deal for Time Warner (TWX +2%) has turned on some key sub-issues, like whether the FCC would get a chance to weigh in, as opposed to merely antitrust reviews.
- Time Warner could sell its license for TV station WPCH in Atlanta, sure; it's Time Warner's FCC licenses for satellite distribution (getting its programs into space and then to people's homes) that could bring in the FCC and thus the biggest threat to the deal.
- Time Warner has dozens of licenses for its dishes that would trigger a review if transferred to AT&T -- and if the company sold its dishes to a third party, that party would still need to get the FCC's OK. AT&T thinks it can "offload" licenses that would trigger a review, says RBC Capital Markets' Jonathan Atkin.
- Meanwhile, the FCC has broad "public interest" authority to end deals that it has a handle on, even by pushing deals to a lengthy hearing (as it did in squelching AT&T's bid for T-Mobile and Comcast's deal for Time Warner Cable).
- But the merger might not face an FCC review under a Trump administration -- "the dawn of a new regulatory day," says analyst Craig Moffett, who now gives the deal a 65% chance of approval. MoffettNathanson upgraded Time Warner to Buy with a price target of $100 (more than 10% upside from today's close).
Thu, Nov. 17, 5:34 PM
- As signaled last month, Warner Bros. (TWX +2%) has its deal to buy the remainder of gamer-focused digital media network Machinima.
- Terms weren't disclosed, though last month's sticking point was Machinima seeking a value of $150M vs. the Warner approach (less than $100M). Warner had first invested in 2014.
- Machinima, the 10th biggest online video company in the country, will operate as a wholly owned subsidiary of Warner Bros. Digital Networks (a unit created in June), and find a home there alongside content based on Warner's DC Comics franchise.
- And it should fit into AT&T's (T +0.7%) plans for acquiring Time Warner: expanding digital video offerings that can be sent to AT&T smartphones.
Wed, Nov. 9, 11:34 AM
- While Time Warner is trading lower as investors digest a slimmer chance of a buyout by AT&T under a Trump administration, Sprint (NYSE:S) -- a company long thought to again become a merger prospect after a change in the White House -- is up 12.5% and hitting two-year highs today.
- Its oft-discussed merger matchup partner, T-Mobile (NASDAQ:TMUS) is up 3.8%.
- Meanwhile, changes are likely coming to the FCC, Wells Fargo argues: It will at least be more conservative, if not working under new leadership soon; expecting Chairman Tom Wheeler to stay a full term is "no longer realistic."
- "If the rhetoric of those surrounding Trump’s campaign rings true, we can expect a Republican FCC to make a big push to roll back some of the regulations put in place under President Obama such as the Title II/Net Neutrality rules," writes analyst Jennifer Fritzsche. "There may also be a push to roll back some or all of what the FCC just did on privacy."
- "It’s unclear whether Chairman Wheeler will be able to act on the open items related to Business Data Services or set top box reform before he departs and if he does not, some suggest a Republican FCC will reverse course on these two items. There is also a big question on how a Trump FCC will view transactions including the recently announced T/TWX merger and the LVLT/CTL transaction."
- LVLT +0.4%; CTL +0.5%. TWX -1%. Names tied to net neutrality: T, VZ, CMCSA, CHTR, OTCPK:ATCEY, CTL, FTR, CCOI, DISH.
Wed, Nov. 9, 10:25 AM
- Time Warner (TWX -1.6%) is lower the morning after America elected Donald Trump its next president -- the man who called deals like AT&T's (T +0.5%) $85B buyout pact "poison."
- "Deals like this destroy democracy," Trump said at a recent rally speaking about the buyout. He said a Trump administration would never sign off on the acquisition since AT&T and CNN together would be "too much concentration of power in the hands of too few."
- That likely includes ripple effects on what has been a fairly rapidly consolidating media sector. Lions Gate (LGF -0.6%) and Starz (STRZA -0.4%) are set to combine and a number of other deals are in the speculative stages as telecoms and content creators adjust to a shifting landscape.
- AT&T looks forward to working with Trump and says it's still optimistic about the Time Warner deal, according to CFO John Stephens.
Tue, Nov. 8, 12:11 PM
- Oppenheimer's downgraded AT&T (T +0.5%) on the prospect that the FCC could jump in with the Justice Dept. on a review of the telecom's $85B deal for Time Warner (TWX +0.1%).
- And that deal review should be a long slog, says Tim Horan: lasting into 2018, he figues, during which time he expects AT&T stock to be range-bound.
- The DOJ suing the company over the Dodgers' TV channel is an "ominous sign," he says, and the FCC will likely want a piece due to the approach to "zero rating" of the DirecTV Now streaming service.
- He reduced the firm's rating on shares to Market Perform. Meanwhile, seeing a more attractive dividend at CenturyLink (CTL +4%), Horan upgraded CTL to Outperform. Oppenheimer has a $30 price target, implying near 24% upside from today's higher price.
Mon, Nov. 7, 8:07 PM
- The synergies from AT&T's (T +0.9%) $85B deal for Time Warner (TWX +1.5%) could be that much sweeter due to an accounting change coming to revenue recognition in 2018 (and using lessons AT&T learned in the DirecTV deal).
- The new standard affects recognizing revenues from customer contracts, creating issues for companies that feature factors like tiered pricing, volume discounts and other marketing offers, and contract modifications along with other contract terms.
- AT&T and Time Warner expect synergies of $1B within three years of closing. But aside from how the new standards affect stand-alone AT&T (such as allocating and timing of revenues between services and handsets), Time Warner sports a programming licensing backlog of $6.9B.
- That's future revenue not yet recognized, and under the new standard licenses could be treated as transferable rights, MarketWatch notes. And that could give AT&T closer control over measurement of deferred taxes and income taxes (along with a positive effect on shareholder equity).
Mon, Nov. 7, 10:41 AM
- Time Warner (NYSE:TWX) is up 1.2% today as Credit Suisse -- seeing a good chance for approval of AT&T's (T +0.9%) $85B buyout of the entertainment giant -- upgrades it to Outperform.
- That's up from a Neutral stance, and analyst Omark Sheikh has reiterated a $107.50 price target, implying 23% upside from today's pricing.
- Pessimism about the deal's chances is "overdone," Sheikh says, as it's a vertical transaction. And blocking it on public interest grounds (usually the bailiwick of the FCC) is "very difficult to justify."
- Even if the deal doesn't get an OK, downside is limited for Time Warner, he says: Fundamentals are good and it wouldn't preclude other suitors from getting involved.
- Previous AT&T/Time Warner coverage
Wed, Nov. 2, 3:20 AM
- AT&T's (NYSE:T) practice of exempting its streaming video services from data-usage caps is rankling competitors and shaping up as a major issue for authorities set to weigh the telecom giant's proposed acquisition of Time Warner (NYSE:TWX).
- According to WSJ, streaming services, media companies and TV networks are likely to press regulators to scrutinize the practice - known as "zero rating" - in their review of AT&T's $85.4B deal.
Mon, Oct. 31, 7:30 PM
- Time Warner (TWX +1.7%) got a lift today, boosted by an upgrade at FBR to Outperform on prospects for a path to avoid FCC review of the company's deal to be bought out by AT&T (NYSE:T).
- Analyst Barton Crockett raised his target price to $104 from $97, implying near-17% upside from today's close of $88.99.
- A small FCC license issue (a small station in Georgia, and uplink facilities for CNN) means the agency would have a hand in the review, but since Time Warner has already described those licenses as "immaterial," Crockett notes it could just give them up.
- And avoiding FCC review "vastly improves prospects for approval," he says. "The FCC has a public interest standard and a loose timeline that can be politicized and make merger approval tough. While the DOJ will review this merger, it moves more quickly and acts based on antitrust law, and so is less politicized than the FCC."
- It also helps politically that Netflix's Reed Hastings has been supportive of the deal, he notes.
Mon, Oct. 31, 3:29 AM
- Upset at being sidelined for advising on the deal, Goldman (NYSE:GS) is trying to persuade Apple (NASDAQ:AAPL) to make a rival bid for Time Warner (NYSE:TWX), according to the NY Post, which cited a source as saying the bank is "freaking out - trying to convince Apple to come in."
- On an earnings call on Wednesday, CEO Tim Cook said, "We are open to acquisitions of any size... I would confirm that television has intense interest with me and many other people here."
Fri, Oct. 28, 7:06 PM
- To finance its $85B deal for Time Warner (NYSE:TWX) -- half of which is coming in cash -- AT&T's (NYSE:T) invited its "relationship banks" to join a $40B bridge loan, at around three ticket levels, Bloomberg reports.
- Based on ratings of Baa1/BBB+ (and AT&T's ratings are on negative watch at the credit rating firms), the loan pricing may open at L+112.5 basis points, with a 10 bp commitment fee, and upfront fees of 20-30 bps.
- The company has BofA Merrill Lynch (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) on board to help finance the deal, though a $30B bond to help fund the deal won't be rushed as doubts remain about whether it will be completed.
- There's no reason to finance early given that ambiguity, a senior banker says. CreditSight analysts: "The merger may ultimately not be approved ... we feel the odds are around 50/50 at this stage."
- Some three-quarters of the financing is expected to take place in the investment-grade market. And doing the deal now rather than waiting for more regulatory certainty could end up more expensive for AT&T.
Fri, Oct. 28, 6:44 PM
- With the help of a very big deal -- AT&T's (NYSE:T) $85B offer for Time Warner (TWX -0.9%) -- companies have set a monthly record for merger and acquisition activity.
- Firms have agreed to M&A valued at more than $251B this month, Dealogic says. That surpasses a previous record month, July 2015, at $240B. The tech sector (signified most recently by Qualcomm's (QCOM -2.4%) $39B deal for NXP Semiconductors (NXPI +0.7%)) has accounted for a fourth of U.S.-targeted deals and 19% by value, just ahead of healthcare.
- Last week was especially hot, with $177B in activity (itself a record for an M&A week).