AT&T has clinched a $US85.4 billion ($A112.1bn) agreement to acquire Time Warner in a stock and cash deal that values the media giant at $US107.50 per share, capping a whirlwind few days of negotiations that promise to turn AT&T into one of the entertainment industry's largest players.
AT&T chairman Randall Stephenson and Time Warner CEO Jeffrey Bewkes held a hastily assembled conference call on Saturday night to unveil the deal that unites AT&T's DirecTV, high-speed Internet and wireless telco services with the vast film, TV and digital operations at Warner Bros., HBO and Turner.
The CEOs emphasised that the agreement came together quickly because they saw the "unique" potential of marrying their assets.
The deal came together quickly because he and Bewkes realised after a conversation about a year ago that they were in sync in their vision for what both companies needed to remain competitive.
At first, Bewkes "made it really clear to me he wasn't selling his company", Stephenson said. But the more they compared notes, they more both realised "this might be unique enough to make it worth investigating", Stephenson said.
"We have a very common view of the world," Stephenson continued.
"From the first time Jeff and I had a conversation this thing just had what I would call gravity and it moved along on its own very natural process."
Bewkes acknowledged that he will eventually step down from the combined entity, but not for some time as the deal will undoubtedly face a long regulatory approval process.
Stephenson stressed that he wanted Bewkes to remain closely involved with the company regardless of his position. And Bewkes said he expected that senior creative and business executives at Time Warner's various divisions "to go on for many years" given the lack of overlap with AT&T's existing management.
Bewkes touted the merger's potential to enhance the ability of Warner Bros, HBO and Turner to invest in content because of AT&T's diversified portfolio.
The merger will "super-charge our capabilities" and give the company more "financial heft," Bewkes said.
With the fast-changing business landscape that MVPDs and content companies are facing, Bewkes and Stephenson realised that by joining forces they could both better lead the charge in adapting to the multiplatform era.
"That's how we got to the view that this would be really game-changing," Bewkes said.
"We're both in the business of evolving our industries faster, not slower."
Stephenson vowed that the combined company will be an innovator in the delivery of programming and advertising, a vital step for any media giant at a time of upheaval for traditional pay TV providers.
Bewkes said that spirit of innovation would be a talent magnet for the content creation side.
The goal is to "evolve the existing eco-system that audiences have used to watch television, and also to move into new capabilities for the way people can access video that go beyond traditional business models," Bewkes said.
Including Time Warner's roughly $US24 billion in debt, the transaction value is pegged $US108.7 billion. The deal calls for AT&T to pay Time Warner shareholders $US53.75 per share in cash and $US53.75 in AT&T stock. Time Warner shareholders will own between 14.4per cent and 15.7per cent of the combined company after the deal closes. Time Warner will account for about 15per cent of the company's revenue.
The deal was approved unanimously by the boards of both companies on Saturday. AT&T projected that the deal will close before the end of 2017.
AT&T emphasised the transaction as a marriage of video, content and mobile services. "The future of video is mobile and the future of mobile is video," AT&T declared in announcing the deal. AT&T predicted it would realise $US1 billion on cost savings through the combination of the companies within the three years of the deal closing.
