AT&T closed its $85.4 billion purchase of Time Warner late Thursday, June 14, a week before the transaction’s expiration date of June 21 and two days after it won an anti-trust case brought by the Department of Justice (DoJ). The DoJ stated on Thursday that it would not seek a stay pending appeal to immediately stop the merger, but said it was still considering whether it would file an appeal, according to The New York Times.The department has 60 days to file such an appeal.
In not asking for a stay, the DoJ appears to have bowed to the wishes of U.S. District Court Judge Richard J. Leon, who presided over the anti-trust case. “There is a grave and understandable fear on the part of the defendants that the Government will now seek to do indirectly what it couldn’t accomplish directly by seeking a stay of this Court’s order pending an appeal to our Circuit Court,” wrote Judge Leon in the conclusion to his ruling. “The consequences of receiving such a stay would cause irreparable harm to the defendants in general and AT&T in specific. First, it would effectively prevent the consummation of the merger by the June 21, 2018 break-up date for the deal. Second, it would cause AT&T to have to pay the $500 million break-up fee it will owe to Time Warner if the deal is not consummated by that date. Those two consequences, of course, would occur regardless of whether this Court’s decision were later upheld following appellate review. In this Court’s judgment, a stay pending appeal would be a manifestly unjust outcome in this case.” Judge Leon also wrote that he would be unlikely to grant such a stay.
With the acquisition, AT&T will have four main business units:
- AT&T Communications, led by unit CEO John Donovan, will handle the company’s mobile, broadband, video, and other communications services to U.S.-based consumers and nearly 3.5 million companies. The operations accounted for revenues of more than $150 billion in 2017.
- AT&T’s media business will house the new Time Warner assets, including HBO, Turner, and Warner Bros. John Stankey will run this business as CEO. The unit, which will get a new name AT&T plans to reveal later, accrued revenues of more than $31 billion in 2017.
- AT&T International, which provides mobile services in Mexico to consumers and businesses, as well as pay-TV service in 11 countries in South America and the Caribbean, had revenues of more than $8 billion in 2017. Lori Lee serves as CEO of this unit as well as global marketing officer of AT&T Inc.
- AT&T’s advertising and analytics business, for which the company also is searching for a name, will provide “advanced advertising solutions” using customer data from AT&T’s TV, mobile, and broadband services as well as ad inventory from Turner and AT&T’s pay-TV services. Brian Lesser will run this unit with a CEO title.
The various unit CEOs will report to AT&T Inc. Chairman and CEO Randall Stephenson. Jeff Bewkes, former chairman and CEO of Time Warner Inc., will stay on temporarily as a senior advisor during an unspecified transition period. His former reports will now work for Stankey.
Time Warner Inc. shareholders have received 1.437 shares of AT&T common stock, in addition to $53.75 in cash, per share of Time Warner Inc., to close the deal. To meet this obligation, AT&T issued 1,185,000 shares of common stock and paid $42.5 billion in cash. Including net debt from Time Warner, AT&T now has $180.4 billion in net debt.
AT&T expects the acquisition to be accretive in terms of first-year adjusted earnings per share and free cash flow; the deal also will strengthen dividend coverage, the company believes. AT&T added that it has identified $1.5 billion in annualized cost synergies by end of Year 3 following close as well as $1 billion of annualized revenue synergies by end of Year 3.
The combination of AT&T, a communications services provider, and content developer Time Warner echoes the tie up between Comcast and NBC/Universal. Observers expect the win in court to open the door for similar mergers among network operators and content providers.
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