Late Friday, AT&T and Time Warner were reported to have entered an agreement in principle for the former to take over the latter for $85 billion.
Either the two were successful in keeping their talks quiet or they agreed to the deal incredibly quickly. As early as this morning, the negotiations between them were being characterized as still informal. (See AT&T & Time Warner in Merger Talks – Report.)
With the acquisition, AT&T is pacing one of its main rivals, Comcast Corp. (Nasdaq: CMCSA, CMCSK). In 2013, Comcast finished a years-long process of buying NBC-Universal, thereby creating a model for the big, vertically integrated media company.
Or, to be more accurate, recreating that model. The Comcast-NBC combination is functionally similar to Time Warner Inc. (NYSE: TWX) as it was constituted the first years of this century. Time Warner owned Time Warner Cable, but Wall Street, after years of pressure, finally succeeded in forcing Time Warner to spin off the MSO. Investors insisted that big, vertically integrated media companies cannot work, and they devalued Time Warner stock until an unconvinced Time Warner had no choice but to acquiesce, if not agree.
It wasn't long before Comcast began its acquisition of NBC-Universal, and since the completion of that deal, there's been speculation that some of Comcast's biggest rivals would feel compelled to follow suit.
But there's no small amount of irony that of all companies, it's Time Warner that AT&T will buy to become a big, vertically integrated media company.
— Brian Santo, Senior Editor, Components, T&M, Light Reading