Confirmed: AT&T is buying Time Warner for $85.4B in cash and shares

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After days of speculation, the deal is now official: AT&T is acquiring Time Warner for $85 billion in a mix of cash and shares, paving the way for another behemoth in the converged media horizon.

The final acquisition price will be $107.50 per share, paid in half cash and half AT&T stock. This means that for each outstanding share of Time Warner stock investors will receive $53.75 in cash and $53.75 in AT&T stock.

This price gives Time Warner a valuation of $85.4 billion – after the deal is finalized Time Warner shareholders will own between 14.4% and 15.7% of all outstanding AT&T shares. Time Warner will represent about 15% of the combined company’s revenues after the deal closes.

AT&T will be financing the cash portion of the transaction – about $42.7 billion, with new debt as well as cash already on the company’s balance sheet.

In terms of combined shareholder benefits, AT&T said the deal should result in $1 billion worth of annual cost synergies within 3 years of the deal closing.

In a way, this deal harkens back to a very old trope in the tech/media/telecoms world: carriers have long worried about becoming dumb pipes and to counteract that need to develop interesting convergence plays.

That’s in essence what AT&T is getting here. The deal will bring the carrier a huge trove of content producing properties, including HBO, CNN, and the Warner Bros. studio that will give it a leg up in its own video and content business. Specifically, the deal will give AT&T a new channel for accessing and using content from the properties it now owns on the services that it sells to consumers. Owning the content means not only better access, but better margins to tap into that content.

There seems to be some kind of poetic symmetry in AT&T buying Time Warner. Its big carrier rival, Verizon, acquired AOL for $4.4 billion in June, 2015. AOL and Time Warner, long ago, combined to form a single company, in what is considered by many to be the worst merger in corporate history (which unsuprisingly eventually split).

Just as Verizon has been snapping up companies to consolidate its position (it’s in the process of buying Yahoo, and it has also put billions into other businesses in other areas like IoT), AT&T has been acquiring more video service providers — including DirecTV and Charter Communications — to expand its footprint in the content delivery business. Now it’s filling out the first part of that moniker: the content.

Senator Al Franken issed a statement on the deal, noting how it may end up being bad for consumers:

“AT&T’s reported proposal to acquire Time Warner for more than $80 billion raises some immediate flags about consolidation in the media market, which is an area I’ve worked to address for years,” said Sen. Franken. “I’m skeptical of huge media mergers because they can lead to higher costs, fewer choices, and even worse service for consumers. And regulators often agree, like when Comcast unsuccessfully tried to buy Time Warner Cable, a deal that I fiercely opposed. In the coming days, I’m going to be pressing for further details about this reported deal and how it would affect the American consumer, who deserves access to the content they want and whose pocketbook continues to be squeezed by rising cable and internet costs.” – Senator Al Franken

Both companies will be holding a joint call at 8:30am ET on Monday morning to discuss the transaction.