39% Annualized Return And AT&T
Chris DeMuth Jr. • 175 Comments
Chris DeMuth Jr. • 175 Comments
Thu, Oct. 27, 3:20 PM
- The Senate's antitrust subcommittee has set a hearing on the proposed AT&T (T +0.5%) buyout of Time Warner (TWX -0.8%) for Dec. 7.
- CEOs for the companies -- Randall Stephenson for AT&T, Jeff Bewkes for Time Warner -- are set to testify at the hearing.
- Updated: Bewkes will be the one to testify, though the subcommittee invited Rob Marcus, former chief of Time Warner Cable, instead -- as even the Senate can't tell apart Time Warner from TWC, the cable company that separated from TWX in 2009 and was sold to Charter earlier this year.
Wed, Oct. 26, 7:04 PM
- Those staring into tea leaves for a read on the likely approval of AT&T's (T -0.8%) deal for Time Warner (TWX +1.7%) would do well to heed the take of presidential candidate Hillary Clinton, who says the transaction calls for study.
- "I think it raises questions and concerns, and they should be looked into," Clinton said on her campaign plane about the blockbuster deal. "If I'm fortunate enough to be president, I will expect the government to conduct a very thorough analysis before making a decision."
- Meanwhile, according to what (currently anonymous) media execs are telling Reuters, media companies will press regulators to make AT&T/Time Warner divulge a mountain of customer data to blunt any potential unfair advantage in targeted ad sales.
- The combination would give the two possibly unprecedented viewing data about its customers. But there's no precedent for data access issues in an antitrust review, so rivals are pressing a tough case.
- AT&T chief Randall Stephenson had acknowledged not only that data was a deal driver but that other providers might get access -- "To the extent that it keeps their content costs down, we'd be open to it," he said -- which suggests a happy medium could be reached for some price.
- Previously: Report: AT&T making millions off trading sensitive user info to law (Oct. 26 2016)
- Previous AT&T/Time Warner coverage
Mon, Oct. 24, 4:43 PM
- U.S. regulators will make their own decisions about whether they'll give a formal review to AT&T's (T -1.7%) deal to acquire Time Warner (TWX -3.1%), the White House says.
- Speaking to reporters aboard Air Force One, administration spokesman Josh Earnest says that deciding to review the deal will be up to personnel at the Justice Dept. and the Federal Trade Commission.
- "Certainly when you consider the size of the deal ... I don't think anybody would be surprised if they announced a review," Earnest says. "The president would hope and expect that regulators would carefully consider the potential impact of this deal on consumers."
- Previous AT&T/Time Warner coverage
Mon, Oct. 24, 12:38 PM
- Moody's has put AT&T (T -1.5%) credit ratings on a review for possible downgrade after absorbing the impact of the carrier's $85B deal to acquire Time Warner.
- That comes as media investors swallow the idea that AT&T could pass $170B in debt after closing the deal, with average annual maturities of $9B starting in 2018.
- The ratings firm expects any such move on AT&T's senior unsecured rating (currently Baa1) to be limited to one notch, though.
- It will focus on pro forma capital structure, and whether AT&T is willing and able to bring leverage back down to around 3x. (Moody's adds its standard 0.7x to reported leverage to estimate gross leverage at AT&T will rise to about 3.5x).
- Earlier AT&T/Time Warner coverage
Mon, Oct. 24, 9:40 AM
- "The convergence in ... media and distribution is fast," says AT&T (T -1.9%) chief Randall Stephenson on a call (still ongoing) addressing the company's $85B deal for Time Warner (TWX -2.8%). "We want to be at the front of it; we don't want to be chasing it."
- The blockbuster deal gets the telecom giant some of today's best-known media brands via Warner Bros., Turner Broadcasting and HBO, but Stephenson singled out three keys: Superman, Game of Thrones and CNN.
- "When Jeff [Bewkes, Time Warner CEO] and I met and both gained conviction about the art of the possible," Stephenson says, "you don't sit around and wait on perfect timing" for deals like this. Given the potential for leaks, "you go ahead and get them done."
- Execs on the call were firm about the deal's chances with regulators. All the deals that have been in trouble over the past few years were horizontal, Stephenson says, with a competitor being taken out of the marketplace: "Jeff's company is a supplier to AT&T."
- The company line is that the legacy separation between content and distribution is getting in consumers' way, and the deal will provide downward pressure on consumer prices and upward pressure on choice. But TWX is trading at a deep discount to the deal so far this morning, likely on regulatory worries.
- Bewkes set straight notions that he'd be leaving the organization ("I'll be staying" for years) and Time Warner will be a wholly owned subsidiary of AT&T and will stay largely the same, says Stephenson. "I've never run a movie studio before," he adds.
- AT&T CFO John Stephens says the cash portion of the half-stock deal is fully funded, with a $40B bridge loan combined with AT&T liquidity. The company likes the debt outlook despite the size of the deal: a net debt/EBITDA of "2.5 range" by end of the first year, approaching the range of 1.8 by the end of year four, and a $1B run-rate synergy by the end of year three. Free cash flow is expected to be accretive in year one, as with EPS.
Mon, Oct. 24, 5:38 AM
- Next up for the blockbuster $85.4B deal for AT&T (NYSE:T) to buy Time Warner (NYSE:TWX) is navigating the political landscape given what are certain to be objections by lawmakers and media/telecom rivals.
- Before the deal was even officially announced, Donald Trump was on the tape saying he would block it, while Clinton running mate Tim Kaine voiced his concerns a few hours later.
- Comcast's purchase of NBC Universal made it through in 2011, but not until after 13 months of review, and some have complained that conditions of the approval - such as its requirement to not weigh in on big decisions at Hulu - were tough to monitor and enforce.
- No stranger to making its way around D.C., AT&T is no doubt stealing itself for what lay ahead, but CEO Randall Stephenson on a Saturday night conference call played down regulatory concerns, arguing this deal isn't increasing industry concentration as it combines a content provider with a content distributor.
Sun, Oct. 23, 10:10 AM
- "Premium content always wins," says AT&T (NYSE:T) CEO Randall Stephenson, who will head the combined company. "It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen." Should the deal go through, the owner of DirecTV would add networks like HBO, TNT, and CNN, along with Warner Bros. film and TV studio to its stable.
- Time Warner (NYSE:TWX) CEO Jeff Bewkes will stay on for an interim period of time to help with the transition.
- The deal is expected to be accretive in year one to T's adjusted EPS and free cash flow, and improve the dividend coverage. The company sees $1B in annual run rate cost synergies within three years of closing.
- Terms: Time Warner owners will receive $107.50 per share comprised of $53.75 of cash and $53.75 in AT&T stock. A collar is involved, meaning TWX shareholders get 1.437 shares of AT&T should its average stock price be below $37.411 at closing, and 1.3 shares of AT&T should it be above $41.349 (Friday's close for T was $37.49, and for TWX $89.48).
- The cash portion of the deal will be funded with cash and new debt. By the end of year one after closing, AT&T expects net debt to adjusted EBITDA to be in the 2.5x range.
- Speaking on a conference call last night, Stephenson played down any regulatory concerns with the argument that AT&T isn't eliminating a competitor, but rather is buying a supplier - the sort of merger typically not blocked by D.C.
- Alongside the merger announcement, AT&T also reported its Q3, with adjusted EPS of $0.74 missing estimates by a penny. The earnings call is set for Monday at 8:30 ET.
Sat, Oct. 22, 2:39 PM
- According to various media reports, AT&T (NYSE:T) has its deal to buy Time Warner (NYSE:TWX) for more than $80B, the biggest media takeover in years.
- That will come between $105 and $110 a share for Time Warner, and could be announced officially tonight.
- Attention now turns to regulatory questions. Is the deal essentially the same as Comcast's 2011 deal to acquire NBCUniversal?
- A small station ownership issue means the FCC will have a say as well.
Fri, Oct. 21, 6:19 PM
- AT&T (NYSE:T) has a deal in principle to buy Time Warner (NYSE:TWX) for $85B, a 16%-plus premium above today's closing market cap, Reuters is reporting.
- That blockbuster could come with full details as soon as Sunday, as Reuters was reporting earlier.
- Following on AT&T's $48B acquisition of DirecTV last year, adding Time Warner would make AT&T a central media player, with control not only of its wide distribution network in satellite and wireless but some of media's most coveted assets: the Warner Bros. film studio, live sports-friendly Turner Broadcasting networks, CNN, and most especially HBO.
- Now after hours: TWX +4.3% to $93.32/share; T -0.8%.
Fri, Oct. 21, 6:03 PM
- No sooner did an AT&T/Time Warner merger seem as close as Monday than Reuters reports the two companies have reached agreement on most terms, with hopes to announce the deal as soon as Sunday.
- Time Warner's (TWX +7.8%) on the move yet again, up 3.9% after hours. AT&T (T -3%) is down 0.6% in postmarket trading.
- Time Warner's after-hours quote puts it at $93.00. Meanwhile, as analysts started to weigh in more today, sources put the deal at "well north" of $90/share (CNBC), and the price could go to $110/share -- a 23% premium above today's close.
- Brean analyst Alan Gould said in a note that the deal could hit the $110-$125 range per share.
- Fox failed in its 2014 pursuit of Time Warner at $85/share.
Fri, Oct. 21, 5:23 PM
- AT&T's (T -3%) interest in Time Warner (TWX +7.8%) progressed quickly from "had talks" to "advanced talks" and now a deal could be set by Monday -- which Bloomberg says is due to a sped-up timetable caused by Bloomberg's initial report.
- That's because AT&T is said to be concerned that the publicity could allow other interested suitors like Apple (AAPL -0.4%) or Alphabet (GOOG +0.3%, GOOGL +0.3%) to jump in -- and indeed Apple is said to be monitoring the deal talks, after it made its own approach to Time Warner a few months ago, The Wall Street Journal reports.
- Those talks involved execs under Apple chief Tim Cook and didn't get beyond a preliminary stage. A source tells the WSJ that Google doesn't look interested in an offer for Time Warner.
- But the story of the deal points out just how much behind-the-scenes strategic talk is going on in the media/telecom spaces, as companies vie to be among the new leaders in an upended, converged digital media climate.
- Sumner Redstone was said to be considering not only the merger of CBS (CBS +2.1%) and Viacom (VIA +2.7%, VIAB +2.8%) that he's already pushing for, but also to combine that entity with Time Warner.
- Meanwhile, Comcast (CMCSA -0.5%) could join another company to get involved, the WSJ says, though that makes more sense if Time Warner's open to being parted out.
- Unlikely to join in this time: Twenty-First Century Fox (FOX +2.2%, FOXA +2.2%), whose own pursuit of Time Warner failed in 2014 at $85/share, and Walt Disney (DIS +1.1%).
- Previously: Time Warner at 15-year highs on merger talk; media companies rise (Oct. 21 2016)
Fri, Oct. 21, 12:02 PM
- Time Warner (TWX +12.4%) is still climbing and cruising to 15-year highs after the WSJ report that it's in advanced talks to be taken over by AT&T (T -3.9%), which is now at its lowest point since February.
- The deal -- which would create a media/telecom giant that would reshape the industry -- would be likely cash and stock, though talks are fluid and might not end in a deal.
- The mix of the deal is likely crucial to its outcome, with Time Warner (not to be confused with Time Warner Cable, now part of Charter Communications) now worth more than $75B -- and a year after AT&T ponied up nearly $49B to take over DirecTV.
- Other potential acquisition targets in media (is anything off the table in a rapidly consolidating sector?) are on the move: DISCA +6.4%, SNI +5.6%, AMCX +4.3%. Lions Gate (NYSE:LGF) made its own move up, +2.4%.
- Engaged in talks about their own re-merger, Viacom (VIA +2.8%, VIAB +4.1%) is up, as is erstwhile and possibly future partner CBS (CBS +2.7%).
Fri, Oct. 21, 11:01 AM
- Time Warner (NYSE:TWX) shares have been halted again after popping another 7.8%, on news that the talks to be acquired by AT&T (NYSE:T) are in their advanced state, and a deal could come as soon as this weekend.
- As with yesterday, AT&T has taken a dive again, -2.7%.
- On reports before the closing bell yesterday that the two companies were meeting to talk about strategic moves (including a merger), Time Warner closed yesterday up 4.7%. AT&T closed down 1.9%.
- Updated 11:04 a.m.: TWX has reopened, now up 8.2%.
- Previously: Bloomberg: Time Warner's Bewkes will sell to AT&T in merger talks if price is right (Oct. 20 2016)
Thu, Oct. 20, 4:05 PM
- In meetings discussing a potential AT&T (NYSE:T) merger with Time Warner (NYSE:TWX), AT&T execs have found a willing seller in Time Warner chief Jeff Bewkes, sources tell Bloomberg, so long as he sees an offer he thinks is fair. And AT&T is on the hunt for content as part of a company transformation that has included its takeover of DirecTV (for an also-whopping $48.5B).
- The two companies met in recent weeks to talk about various strategies in discussions characterized as informal and focused on building relations at the moment, Bloomberg says. Nobody's hired a financial adviser yet.
- Time Warner famously rejected a 2014 bid from Rupert Murdoch and Fox (at $85/share) that valued the company at more than $75B; it's worth about $64.5B in market cap today accounting for today's gain.
- A deal makes sense, says Albert Fried analyst Rich Tullo, with 5G mobile on the way and AT&T set to benefit from a great content catalog at Time Warner.
- The talks are probably more about skinny bundles and "VMVPD distribution," he figures, but 5G mobile and its video-transferring capabilities make a deal more worthwhile. The company's sum-of-the-parts analysis had previously figured Warner Bros. and Turner networks as worth about $30B each.
- TWX has given back some of its initial spike, closing up 4.8%; T closed down 1.9%.
Thu, Sep. 29, 1:53 PM
- Is there any merger combination that isn't being floated (or thrown at the wall) in media/telecom this year? As distributors and content providers consider tie-ups to go for horizontal and vertical consolidation, Barclays' latest look is at Time Warner (TWX -0.4%) and AT&T (T -0.5%).
- Time Warner is one of the few media companies that doesn't have super-voting shares, note analysts Kannan Venkateshwar and Amir Rozwadowski, and could provide immediate scale in differentiated content creation.
- Up front, though, financial benefits "do not seem as readily apparent," the two say. Without stand-alone financial reasons, a deal might need justification on competitive grounds as well as "opportunity costs and revenue synergies with benefits unlikely to accrue immediately."
- Time Warner famously failed to merge with Twenty-First Century Fox (FOX -1%, FOXA -1%) two years ago, and the analysts note AT&T also has its hands full with DirecTV and Mexico (not to mention the launch of streaming TV via DirecTV Now).
Wed, Sep. 28, 6:28 PM
- Now officially linked in to wide-ranging speculation about who might buy Twitter (TWTR -3.2%): AT&T (T -1.5%).
- A purchase by AT&T could make sense, Mizuho's Neil Doshi writes, but he thinks Twitter's valuation is such that an acquisition doesn't really add up for anybody. He's downgraded TWTR to Underperform, with a price target of $15 (Twitter shares closed today at $22.96).
- If not great fits, the best fits for a Twitter purchase are Salesforce (NYSE:CRM), Alphabet (GOOG, GOOGL) and AT&T, "but that is about it" and "only Alphabet makes sense from a strategic perspective."
- Fundamentals at Twitter have "deteriorated significantly" over the past year, Doshi says. Verizon's paying about six times EV/EBITDA for the core of Yahoo (growing almost as fast as Twitter in many respects), while Twitter trades near a multiple of 16. Microsoft is buying LinkedIn for 20 times, though LinkedIn is growing much faster than Twitter.
- Meanwhile, Nomura reiterated a Neutral rating on Twitter and price target of $13, while Loop Capital downgraded to Sell from Hold, with a price target of $18.