Updated 10-22-16 from original report to inlcude deal specifics.
AT&T (NYSE:T) is buying Time Warner (NYSE:TWX) in a deal valued at $80 billion, according to the Wall Street Journal. The boards are expected to approve the combination over the weekend. News of the merger was first reported on Thursday.
“This deal is unlikely to happen,” said Porter Bibb of Mediatech Capital Partners during an interview with FOXBusiness.com on Friday. He noted several factors including potential regulatory hurdles. However, “there are other people likely to step in," he said.
Bibb says Time Warner is perfect for a private equity firm because the media giant is bloated. “Private equity would lick their chops, it is so overburdened with fat,” he said. Additionally, Apple (NASDAQ:AAPL) reportedly held talks with Time Warner, which collapsed.
Inquiries by FOXBusiness.com to Time Warner and AT&T were not returned at the time of publication.
Anyone who follows the media sector knows Time Warner’s Chief Jeff Bewkes has talked to many companies about a deal, including 21st Century Fox (NASDAQ:FOXA), the parent of FOXBusiness.com, FOX Business Network and Fox News. That deal fell apart in August of 2014. At the time, Chairman and CEO Rupert Murdoch commented:
“We viewed a combination with Time Warner as a unique opportunity to bring together two great companies, each with celebrated content and brands. Our proposal had significant strategic merit and compelling financial rationale and our approach had always been friendly. However, Time Warner management and its Board refused to engage with us to explore an offer which was highly compelling.”
Over two years later, Bewkes may be more serious says Bibb, because of a strong uptick in streaming and lucrative content. Both which need a cable powerhouse company to deliver it.
One of the hottest Time Warner brands today is HBO, which owns content that includes major hits such as “Game of Thrones” and boasts more subscribers than Netflix (NASDAQ:NFLX), which currently stands at 86.7 million. HBO has over 131 million globally and it owns 90% of its own content, much higher than Netflix. HBO's revenues were $1.5 billion in the most recent quarter.
There is also ongoing consolidation. Verizon (NYSE:VZ) is buying Yahoo (NASDAQ:YHOO) for nearly $5 billion, although the recent security breach at Yahoo has raised questions about whether the deal will get completed. Verizon’s CFO Fran Shammo told investors the situation is under review.
And the Redstone family, Sumner and his daughter Shari, who control the bulk of the voting stock, continue to explore a combination of CBS (NYSE:CBS) and Viacom (NYSE:VIA).