Talks Signal Start of a New Merger Dance -- WSJ
22 October 2016 - 6:02PM
Dow Jones News
By Shalini Ramachandran, Dana Mattioli and Keach Hagey
Apple Inc. approached Time Warner Inc. about pursuing a
combination a few months ago, and though the discussions didn't
progress beyond a preliminary stage, Apple is now monitoring the
media giant's talks with AT&T Inc. , people familiar with the
matter said Friday.
AT&T is now in advanced talks to purchase Time Warner, The
Wall Street Journal has reported, and a deal could come together
within days.
The talks for Time Warner suggest there is a greater merger
dance occurring in the media industry as conglomerates, telecom
companies and tech giants try to stake their claim on the future. A
host of other contenders could jump into the fray for Time Warner
and scuttle the planned deal, media executives and analysts
say.
Time Warner is viewed as perhaps the most attractive stand-alone
media asset, given its premium content brands -- which include HBO,
CNN and Warner Bros.--and the fact it doesn't have a controlling
shareholder. The company had $28 billion in revenue last year and
had a market capitalization of $68 billion before the Journal
reported on the deal. Time Warner shares were up 7% in afternoon
trading.
"There has been along list of companies speculated to be
interested in acquiring (Time Warner), starting with the almighty
Apple. So if ATT wants this deal, it is in their best interest to
move as fast as possible," wrote Todd Juenger of Bernstein Research
in a research note.
At the same time, a Time Warner transaction could help trigger
more media deal-making as industry bosses try to drum up strategies
to position them for a world where streaming media is on the rise
and pay TV cord-cutting is taking a financial toll.
Content companies are looking to bulk up to deal with giant
distributors, including AT&T, which added DirecTV to its fold
last year. An AT&T-Time Warner deal would "certainly kick off
the dance," said one top media industry executive said.
An AT&T-Time Warner deal could also prove to be a spoiler
for Sumner Redstone's National Amusements Inc., which controls CBS
Corp. and Viacom Inc. and recently asked the two companies to
explore a merger. National Amusements had been considering the
possibility of a deal that merged Viacom-CBS entity and Time
Warner, according to people familiar with the matter.
CBS Chief Executive Leslie Moonves has floated the idea to Time
Warner CEO Jeff Bewkes multiple times over the past few years,
people familiar with the matter have said. Time Warner didn't see
huge advantages to adding a broadcaster to its cable network
portfolio and the two sides didn't agree on valuation, the people
said.
From Apple's end, executives under Chief Executive Tim Cook were
involved in the earlier talks. Apple has pursued plans to build an
online TV service and has begun creating original programming of
its own. Before its most recent approach, Eddy Cue, Apple's senior
vice president of internet software and services, brought up a
potential combination in a meeting with Time Warner's head of
corporate strategy Olaf Olafsson last year, the people said, though
the talks never went further than that. The Financial Times earlier
reported last year's approach.
Google doesn't appear interested in making a Time Warner offer,
a person familiar with the situation said. A Google spokesman
didn't immediately respond to a request for comment.
Cable giant Comcast Corp. might look to get into the action on
Time Warner in concert with another company, some media executives
said, especially if Time Warner is open to selling in pieces. Even
if it doesn't get involved now, the executives say Comcast may be
empowered to buy other media companies without broadcast networks,
like Discovery Communications or Viacom Inc., if an AT&T-Time
Warner deal wins regulatory approval.
21st Century Fox and Walt Disney Co. are unlikely to join the
fray, people familiar with the situation say.
Other sectors have undergone rapid megamergers after two
competitors combined and remaining companies sized up the
landscape. Last year, the health-care insurance space saw two
megamergers in quick succession after Humana Inc. put itself up for
sale.
Aetna Inc. agreed to buy Humana for $34.1 billion in early July
2015. Just a few weeks later, Anthem Inc. struck a deal to buy
Cigna Corp. for more than $48 billion.
The semiconductor space has had a similar reshaping. Last year
marked the highest volume for semiconductor M&A, marked by
record deals such as Avago's $37 billion deal to buy Broadcom and
Intel Corp.'s $16.7 billion deal to buy Altera.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com,
Dana Mattioli at dana.mattioli@wsj.com and Keach Hagey at
keach.hagey@wsj.com
(END) Dow Jones Newswires
October 22, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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