AT&T Inc. (NYSE: T) announced over the weekend that
it had entered into an agreement to acquire 100 percent of Time Warner Inc (NYSE: TWX) in a combination cash-stock deal that valued Time Warner at $108,7 billion or
$107.50 per share.
Loop Capital’s David W. Miller maintained a Buy rating on Time Warner, while raising the price target from $96 to $107.50.
Related Link: The
Strategic Rationale For AT&T's Bid To Buy Time Warner
According to the terms of the agreement, Time Warner’s 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 TWX shareholders will receive 1.437 T shares if T’s average stock price
is below $37.411 at closing, and 1.3 T shares if T’s average stock price is above $41.349 at closing,” Miller explained.
The purchase price suggests total equity value of $85.4 billion, with a total transaction value of $108.7 billion, inclusive of
net debt.
Regulatory Heat Likely
“While TWX investors will clearly celebrate today, one angle that investors may not be considering right now is the future
position of both the Department of Justice (DOJ) and the Federal Communications Commission (FCC),” the analyst stated.
Miller explained that since the AT&T and Time Warner merger would be a vertical one, the combined entity might need to agree
to various concessions in order to meet the closing conditions,
However, these concessions could potentially alter the value of the deal and could include clauses such as not pursuing
“predatory pricing” on Turner affiliate negotiations with competing MVPDs, “not positioning competing entertainment networks at a
high channel number”, and not creating a “toll road” for over-the-top systems.
Latest Ratings for TWX
Date |
Firm |
Action |
From |
To |
Oct 2016 |
Evercore ISI Group |
Downgrades |
Buy |
Neutral |
Oct 2016 |
Atlantic Equities |
Downgrades |
Overweight |
Neutral |
Oct 2016 |
Moffett Nathanson |
Downgrades |
Buy |
Neutral |
View More Analyst Ratings for
TWX
View the Latest Analyst Ratings
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