AT&T Inc. agreed to buy Time Warner Inc. for $85.4 billion, forming a telecommunications and media empire that will own many of the movies and TV shows it pumps through to subscribers of its wireless, internet and pay-TV services.

The cash-and-stock deal values Time Warner at about $107.50 a share, the companies said Saturday in a statement, 20 percent more than Friday’s closing price. Time Warner shareholders are to receive $53.75 per share in cash and $53.75 a share in AT&T stock.

“This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works,” AT&T Chairman and Chief Executive Officer Randall Stephenson said in the statement.

The deal caps Stephenson’s vision to expand AT&T into media and entertainment as its wireless business matures. Gaining premium cable channel HBO, CNN and the Warner Bros. studio means AT&T becomes a content owner rather than just a distributor of video.

The combination will “disrupt the traditional entertainment model and push the boundaries on mobile content availability,” according to the statement.

Senior executives of the companies had met in recent weeks to discuss business strategies and an agreement was near as of Friday, Bloomberg reported, citing people familiar with the talks. The acquisition comes a little more than a year after Dallas-based AT&T became the largest U.S. pay-TV distributor when it completed its $48.5 billion purchase of satellite-TV provider DirecTV.

The transaction is valued at $108.7 billion including Time Warner’s net debt. Once the deal closes, Time Warner shareholders will own from 14.4 percent to 15.7 percent of AT&T shares. AT&T expects the deal to be accretive in the first year and sees $1 billion in annual cost synergies within three years of closing.

Source:
courtesy of REUTERS

by Lisa Wolfson and Scott Moritz

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