AT&T set to announce $85 billion Time Warner purchase

AT&T Inc is set to announce an $85 billion deal to buy Time Warner Inc on Saturday, sources familiar with the matter said, the boldest move yet by a telecommunications company to acquire content to stream over its high-speed network in an attempt to appeal to a growing number of online viewers.

The biggest deal in the world this year would give AT&T control of cable TV channels HBO and CNN, film studio Warner Bros and other coveted media assets. It would likely face intense scrutiny by U.S. antitrust regulators worried that AT&T might try to limit distribution of Time Warner material.

AT&T will pay $110 per Time Warner share, half in cash and half in stock, worth about $85 billion overall, sources told Reuters.

The Dallas-based company will need to line up financing to pay for the deal, since it has only $7.2 billion in cash on hand. This could put pressure on its credit rating as it already had $120 billion in net debt as of June 30, according to Moody's.

The boards of the two companies were meeting on Saturday to approve the deal, sources told Reuters.

U.S. Republican presidential nominee Donald Trump, who has complained about what he sees as unfair coverage of his campaign, said at a rally on Saturday he would block any AT&T-Time Warner deal if he wins the Nov. 8 election.

"It's too much concentration of power in the hands of too few," said Trump.

Representatives of his Democratic rival, Hillary Clinton, did not immediately respond to a request for comment.

The American Cable Association, which represents independent U.S. cable TV operators, said on Saturday that "combining valuable content with pay-TV distribution causes harm to consumers and competition in the pay-TV market," and urged regulators to closely examine the deal.

CONTENT PLUS DELIVERY

AT&T, whose main wireless phone and broadband service business is showing signs of slowing, has already made moves to turn itself into a media powerhouse. It bought satellite TV provider DirecTV last year for $48.5 billion.

It had about 142 million North American wireless subscribers as of June 30, and about 38 million video subscribers through DirecTV and its U-verse service.

New York-based Time Warner is a major force in movies, TV and video games. Its assets include the HBO, CNN, TBS and TNT networks as well as the Warner Bros film studio, producer of the “Batman” and “Harry Potter” film franchises. The company also owns a 10 percent stake in video streaming site Hulu. The HBO network alone has more than 130 million subscribers.

AT&T is following in the footsteps of cable company Comcast Corp , which acquired NBCUniversal for about $30 billion and DreamWorks Animation in a bid to control how television shows and movies are made and how they are delivered to viewers.

Meanwhile, AT&T's wireless rival Verizon Communications Inc is in the process of buying internet company Yahoo Inc for about $4.8 billion.

SECOND TIME AROUND

Time Warner Chief Executive Officer Jeff Bewkes rejected an $80 billion offer from Twenty-First Century Fox Inc in 2014. Sources said on Friday that the former suitor had no plans to renew its bid.

The Wall Street Journal reported on Friday that Apple Inc approached Time Warner a few months ago about a possible merger.

Owning more content gives cable and telecom companies bargaining leverage with other content companies as customers demand smaller, hand-picked cable offerings or switch to watching online. New mobile technology including next-generation 5G networks could make a content tie-up especially attractive for wireless providers.

"We think 5G mobile is coming, we think 5G mobile is an epic game-changer," Rich Tullo, director of research at Albert Fried & Co, said in a research note, adding that mobile providers would be in position to disrupt traditional pay-TV services.

A previous Time Warner blockbuster deal, its 2000 merger with AOL, is now considered one of the most ill-advised corporate marriages on record.

AT&T and Time Warner did not respond to requests for comment.

(Additional reporting by David Shepardson, Liana Baker and Malathi Nayak; Editing by Bill Rigby and David Gregorio)