- New company with complementary
strengths to lead the next wave of innovation in converging media
and communications industry
- Combination unlike any other — the
world’s best premium content with the networks to deliver it to
every screen, however customers want it
- The future of video is mobile and the
future of mobile is video
- Time Warner is a global leader in
creating premium content, has the largest film/TV studio in world
and an unrivaled library of entertainment
- AT&T has unmatched
direct-to-customer distribution across TV, mobile and broadband in
the U.S., mobile in Mexico and TV in Latin America.
- Combined company positioned to
create new customer choices — from content creation and
distribution to a mobile-first experience that’s personal and
social
- Goal is to give customers unmatched
choice, quality, value and experiences that will define the future
of media and communications
- Customer insights across TV, mobile and
broadband will allow new company to: offer more relevant and
valuable addressable advertising; innovate with ad-supported
content models; better inform content creation; and make OTT and TV
Everywhere products smarter and more personalized
- Acquisition provides significant
financial benefits
- Accretive to AT&T in the first year
after close on adjusted EPS & free cash flow per share
basis
- Improves AT&T’s dividend
coverage
- Improves AT&T’s revenue and
earnings growth profile
- Diversifies AT&T’s revenue mix and
lowers capital intensity
- Committed to strong balance sheet and
maintaining investment-grade credit metrics
- Delivers significant benefits for
customers
- Stronger competitive alternative to
cable & other video providers
- Provides better value, more choices,
enhanced customer experience for over-the-top and mobile
viewing
- More innovation with ad-supported
models that shift more cost of content creation from customers to
advertisers
AT&T Inc. (NYSE:T) and Time Warner Inc. (NYSE:TWX) today
announced they have entered into a definitive agreement under which
AT&T will acquire Time Warner in a stock-and-cash transaction
valued at $107.50 per share. The agreement has been approved
unanimously by the boards of directors of both companies.
The deal combines Time Warner's vast library of content and
ability to create new premium content that connects with audiences
around the world, with AT&T's extensive customer relationships,
world’s largest pay TV subscriber base and leading scale in TV,
mobile and broadband distribution.
“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 for customers, content creators,
distributors and advertisers,” said Randall Stephenson, AT&T
chairman and CEO. “Premium content always wins. It has been true on
the big screen, the TV screen and now it’s proving true on the
mobile screen. We’ll have the world’s best premium content with the
networks to deliver it to every screen. A big customer pain point
is paying for content once but not being able to access it on any
device, anywhere. Our goal is to solve that. We intend to give
customers unmatched choice, quality, value and experiences that
will define the future of media and communications.
“With great content, you can build truly differentiated video
services, whether it’s traditional TV, OTT or mobile. Our TV,
mobile and broadband distribution and direct customer relationships
provide unique insights from which we can offer addressable
advertising and better tailor content,” Stephenson said. “It’s an
integrated approach and we believe it’s the model that wins over
time.
“Time Warner’s leadership, creative talent and content are
second to none. Combine that with 100 million plus customers who
subscribe to our TV, mobile and broadband services – and you have
something really special,” said Stephenson. “It’s a great fit, and
it creates immediate and long-term value for our shareholders.”
Time Warner Chairman and CEO Jeff Bewkes said, “This is a great
day for Time Warner and its shareholders. Combining with AT&T
dramatically accelerates our ability to deliver our great brands
and premium content to consumers on a multiplatform basis and to
capitalize on the tremendous opportunities created by the growing
demand for video content. That’s been one of our most important
strategic priorities and we’re already making great progress — both
in partnership with our distributors, and on our own by connecting
directly with consumers. Joining forces with AT&T will allow us
to innovate even more quickly and create more value for consumers
along with all our distribution and marketing partners, and allow
us to build on a track record of creative and financial excellence
that is second to none in our industry. In fact, when we announce
our 3Q earnings, we will report revenue and operating income growth
at each of our divisions, as well as double-digit earnings
growth.
Bewkes continued, “This is a natural fit between two companies
with great legacies of innovation that have shaped the modern media
and communications landscape, and my senior management team and I
are looking forward to working closely with Randall and our new
colleagues as we begin to capture the tremendous opportunities this
creates to make our content even more powerful, engaging and
valuable for global audiences.”
Time Warner is a global leader in media and entertainment with a
great portfolio of content creation and aggregation, and iconic
brands across video programming and TV/film production. Each of
Time Warner’s three divisions is an industry leader: Turner
consists of U.S. and international basic cable networks, including
TNT, TBS, CNN and Cartoon Network/Adult Swim, and has sports right
that include the National Basketball Association, NCAA Men’s
Championship Basketball Tournament, and Major League Baseball; HBO,
which consists of domestic premium pay television and streaming
services (HBO Now, HBO Go) featuring such original series as Game
of Thrones, VEEP, and Silicon Valley, as well as international
premium & basic pay television and streaming services; and
Warner Bros. Entertainment, which consists of television, feature
film, home video and videogame production and distribution. Film
franchises include Harry Potter, DC Entertainment, and LEGO;
TV series produced include The Big Bang Theory, The Voice, and
Gotham. Time Warner also has invested in over-the-top and digital
media properties such as Bleacher Report, Hulu and Machinima.
Customer Benefits
The new company will deliver what customers want — enhanced
access to premium content on all their devices, new choices for
mobile and streaming video services and a stronger competitive
alternative to cable TV companies.
With a mobile network that covers more than 315 million people
in the United States, the combined company will strive to become
the first U.S. mobile provider to compete nationwide with cable
companies in the provision of bundled mobile broadband and video.
It will disrupt the traditional entertainment model and push the
boundaries on mobile content availability for the benefit of
customers. And it will deliver more innovation with new forms of
original content built for mobile and social, which builds on Time
Warner’s HBO Now and the upcoming launch of AT&T’s OTT offering
DIRECTV NOW.
Owning content will help AT&T innovate on new advertising
options, which, combined with subscriptions, will help pay for the
cost of content creation. This two-sided business model —
advertising- and subscription-based — gives customers the largest
amount of premium content at the best value.
Summary Terms of Transaction
Time Warner shareholders will receive $107.50 per share under
the terms of the merger, comprised of $53.75 per share in cash and
$53.75 per share in AT&T stock. The stock portion will be
subject to a collar such that Time Warner shareholders will receive
1.437 AT&T shares if AT&T’s average stock price is below
$37.411 at closing and 1.3 AT&T shares if AT&T’s average
stock price is above $41.349 at closing.
This purchase price implies a total equity value of $85.4
billion and a total transaction value of $108.7 billion, including
Time Warner’s net debt. Post-transaction, Time Warner shareholders
will own between 14.4% and 15.7% of AT&T shares on a
fully-diluted basis based on the number of AT&T shares
outstanding today.
The cash portion of the purchase price will be financed with new
debt and cash on AT&T’s balance sheet. AT&T has an 18-month
commitment for an unsecured bridge term facility for $40
billion.
Transaction Will Result in Significant Financial
Benefits
AT&T expects the deal to be accretive in the first year
after close on both an adjusted EPS and free cash flow per share
basis.
AT&T expects $1 billion in annual run rate cost synergies
within 3 years of the deal closing. The expected cost synergies are
primarily driven by corporate and procurement expenditures. In
addition, over time, AT&T expects to achieve incremental
revenue opportunities that neither company could obtain on a
standalone basis.
Given the structure of this transaction, which includes AT&T
stock consideration as part of the deal, AT&T expects to
continue to maintain a strong balance sheet following the
transaction close and is committed to maintaining strong
investment-grade credit metrics.
By the end of the first year after close, AT&T expects net
debt to adjusted EBITDA to be in the 2.5x range.
Additionally, AT&T expects the deal to improve its dividend
coverage and enhance its revenue and earnings growth profile.
Time Warner provides AT&T with significant diversification
benefits:
- Diversified revenue mix — Time Warner
will represent about 15% of the combined company’s revenues,
offering diversification from content and from outside the United
States, including Latin America, where Time Warner owns a majority
stake in HBO Latin America, an OTT service available in 24
countries, and AT&T is the leading pay TV distributor.
- Lower capital intensity — Time Warner’s
business requires little in capital expenditures, which helps
balance the higher capital intensity of AT&T’s existing
business.
- Regulation — Time Warner’s business is
lightly regulated compared to much of AT&T’s existing
operations.
The merger is subject to approval by Time Warner Inc.
shareholders and review by the U.S. Department of Justice. AT&T
and Time Warner are currently determining which FCC licenses, if
any, will be transferred to AT&T in connection with the
transaction. To the extent that one or more licenses are to be
transferred, those transfers are subject to FCC review. The
transaction is expected to close before year-end 2017.
Conference Call/Webcast
On Monday, October 24, at 8:30 am ET, AT&T and Time Warner
will host a webcast presentation to discuss the transaction and
AT&T’s 3Q earnings. Links to the webcast and accompanying
documents will be available on both AT&T’s and Time Warner’s
Investor Relations websites. AT&T has cancelled its previously
scheduled call to discuss earnings, which had been set for Tuesday,
October 25.
About AT&T
AT&T Inc. (NYSE:T) helps millions around the globe connect
with leading entertainment, mobile, high-speed Internet and voice
services. We’re the world’s largest provider of pay TV. We have TV
customers in the U.S. and 11 Latin American countries. We offer the
best global coverage of any U.S. mobile provider*. And we help
businesses worldwide serve their customers better with our mobility
and highly secure cloud solutions.
About Time Warner Inc.
Time Warner Inc. (NYSE:TWX) is a global leader in media and
entertainment with a great portfolio of content creation and
aggregation, and iconic brands across video programming and TV/film
production. Each of Time Warner’s three divisions is an industry
leader: Turner consists of U.S. and international basic cable
networks, including TNT, TBS, CNN and Cartoon Network/Adult Swim,
and has sports right that include the National Basketball
Association, NCAA Men’s Championship Basketball Tournament, and
Major League Baseball; HBO, which consists of domestic premium pay
television and streaming services (HBO Now, HBO Go) featuring such
original series as Game of Thrones, VEEP, and Silicon Valley, as
well as international premium & basic pay television and
streaming services; and Warner Bros. Entertainment, which consists
of television, feature film, home video and videogame production
and distribution. Film franchises include Harry Potter, DC
Entertainment, and LEGO; TV series produced include The Big Bang
Theory, The Voice, and Gotham. Time Warner also has invested in
over-the-top and digital media properties such as Bleacher Report,
Hulu and Machinima.
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this communication, including financial
estimates and statements as to the expected timing, completion and
effects of the proposed merger between AT&T and Time Warner,
constitute forward-looking statements within the meaning of the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These estimates and statements are subject to risks
and uncertainties, and actual results might differ materially. Such
estimates and statements include, but are not limited to,
statements about the benefits of the merger, including future
financial and operating results, the combined company’s plans,
objectives, expectations and intentions, and other statements that
are not historical facts. Such statements are based upon the
current beliefs and expectations of the management of AT&T and
Time Warner and are subject to significant risks and uncertainties
outside of our control.
Among the risks and uncertainties that could cause actual
results to differ from those described in the forward-looking
statements are the following: (1) the occurrence of any event,
change or other circumstances that could give rise to the
termination of the merger agreement, (2) the risk that TIME WARNER
stockholders may not adopt the merger agreement, (3) the risk that
the necessary regulatory approvals may not be obtained or may be
obtained subject to conditions that are not anticipated, (4) risks
that any of the closing conditions to the proposed merger may not
be satisfied in a timely manner, (5) risks related to disruption of
management time from ongoing business operations due to the
proposed merger, (6) failure to realize the benefits expected from
the proposed merger and (7) the effect of the announcement of the
proposed merger on the ability of TIME WARNER and AT&T to
retain customers and retain and hire key personnel and maintain
relationships with their suppliers, and on their operating results
and businesses generally. Discussions of additional risks and
uncertainties are contained in AT&T’s and TIME WARNER’s filings
with the Securities and Exchange Commission. Neither AT&T nor
TIME WARNER is under any obligation, and each expressly disclaim
any obligation, to update, alter, or otherwise revise any
forward-looking statements, whether written or oral, that may be
made from time to time, whether as a result of new information,
future events, or otherwise. Persons reading this announcement are
cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. This communication may be deemed to be
solicitation material in respect of the proposed merger between
AT&T and TIME WARNER. In connection with the proposed merger,
AT&T intends to file a registration statement on Form S-4,
containing a proxy statement/prospectus with the Securities and
Exchange Commission (“SEC”). STOCKHOLDERS OF TIME WARNER ARE URGED
TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE
PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. Investors and security
holders will be able to obtain copies of the proxy
statement/prospectus as well as other filings containing
information about AT&T and TIME WARNER, without charge, at the
SEC’s website, http://www.sec.gov. Copies of documents filed with
the SEC by AT&T will be made available free of charge on
AT&T’s Investor Relations Website. Copies of documents filed
with the SEC by TIME WARNER will be made available free of charge
on TIME WARNER’s Investor Relations Website.
Participants in Solicitation
AT&T and its directors and executive officers, and TIME
WARNER and its directors and executive officers, may be deemed to
be participants in the solicitation of proxies from the holders of
TIME WARNER common stock in respect to the proposed merger.
Information about the directors and executive officers of AT&T
is set forth in the proxy statement for AT&T’s 2016 Annual
Meeting of Stockholders, which was filed with the SEC on March 11,
2016. Information about the directors and executive officers of
TIME WARNER is set forth in the proxy statement for TIME WARNER’s
2016 Annual Meeting of Stockholders, which was filed with the SEC
on May 19, 2016. Investors may obtain additional information
regarding the interest of such participants by reading the proxy
statement/prospectus regarding the proposed merger when it becomes
available.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161022005014/en/
AT&TBrad Burns,
214-757-7520brad.burns@att.comFletcher Cook,
214-757-7629fletcher.cook@att.com
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