AT&T To Purchase Time Warner In $85.4 Bln Cash And Stock Deal

(RTTNews) - AT&T Inc. (T) announced a definitive agreement to purchase Time Warner Inc. (TWX) in a stock-and-cash transaction valued at $107.50 per share. Both the companies boards have unanimously approved the transaction. 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.

Randall Stephenson, AT&T chairman and CEO, said, "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,"

Time Warner shareholders will receive $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.

AT&T plans to finance cash portion of the purchase price with new debt and cash on its balance sheet. AT&T has an 18-month commitment for an unsecured bridge term facility for $40 billion.

AT&T expects this deal to be accretive in the first year after close on both an adjusted EPS and free cash flow per share basis and also expects $1 billion in annual run rate cost synergies within 3 years of the deal closing. In addition, over time, AT&T expects to achieve incremental revenue opportunities that neither company could obtain on a standalone basis.

AT&T also anticipates the deal, which is expected to close before year-end 2017, to improve its dividend coverage and enhance its revenue and earnings growth profile.

T closed Friday's regular trading session down 3% at $37.49, while TWX closed up 7% at $89.48.