Apple Approached Time Warner About Possible Merger Before AT&T Talks
Media giant’s advanced talks with telecom company could set off a deal frenzy
ENLARGE
PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
By SHALINI RAMACHANDRAN, DANA MATTIOLI and KEACH HAGEY
Updated Oct. 21, 2016 4:42 p.m. ET
3 COMMENTS
Apple Inc. a few months ago approached Time Warner about pursuing a combination, and though the discussions didn’t progress beyond a preliminary stage, Apple is now monitoring the situation, people familiar with the matter said Friday.
AT&T is now in advanced talks to purchase Time Warner, The Wall Street Journal has reported, and a deal could come together within days.
The talks for Time Warner suggest there is a greater merger dance occurring in the media industry as conglomerates, telecom companies and tech giants try to stake their claim on the future. A host of other contenders could jump into the fray for Time Warner and scuttle the planned deal, media executives and analysts say.
Time Warner is viewed as perhaps the most attractive stand-alone media asset, given its premium content brands—which include HBO, CNN and Warner Bros.--and the fact it doesn’t have a controlling shareholder. The company had $28 billion in revenue last year and had a market capitalization of $68 billion before the Journal reported on the deal. Time Warner shares were up 7% in afternoon trading.
“There has been along list of companies speculated to be interested in acquiring (Time Warner), starting with the almighty Apple. So if ATT wants this deal, it is in their best interest to move as fast as possible,” wrote Todd Juenger of Bernstein Research in a research note.
At the same time, a Time Warner transaction could help trigger more media deal-making as industry bosses try to drum up strategies to position them for a world where streaming media is on the rise and pay TV cord-cutting is taking a financial toll.
Content companies are looking to bulk up to deal with giant distributors, including AT&T, which added DirecTV to its fold last year. An AT&T-Time Warner deal would “certainly kick off the dance,” said one top media industry executive said.
An AT&T-Time Warner deal could also prove to be a spoiler for Sumner Redstone’s National Amusements Inc., which controls CBS Corp. and Viacom Inc. and recently asked the two companies to explore a merger. National Amusements had been considering the possibility of a deal that merged Viacom-CBS entity and Time Warner, according to people familiar with the matter.
CBS Chief Executive Leslie Moonves has floated the idea to Time Warner CEO Jeff Bewkes multiple times over the past few years, people familiar with the matter have said. Time Warner didn’t see huge advantages to adding a broadcaster to its cable network portfolio and the two sides didn’t agree on valuation, the people said.
From Apple’s end, executives under Chief Executive Tim Cook were involved in the earlier talks. Apple has pursued plans to build an online TV service and has begun creating original programming of its own. Before its most recent approach, Eddy Cue, Apple’s senior vice president of internet software and services, brought up a potential combination in a meeting with Time Warner’s head of corporate strategy Olaf Olafsson last year, the people said, though the talks never went further than that. The Financial Times earlier reported last year’s approach.
Google doesn’t appear interested in making a Time Warner offer, a person familiar with the situation said. A Google spokesman didn’t immediately respond to a request for comment.
Cable giant Comcast Corp. might look to get into the action on Time Warner in concert with another company, some media executives said, especially if Time Warner is open to selling in pieces. Even if it doesn’t get involved now, the executives say Comcast may be empowered to buy other media companies without broadcast networks, like Discovery Communications or Viacom Inc., if an AT&T-Time Warner deal wins regulatory approval.
21st Century Fox and Walt Disney Co. are unlikely to join the fray, people familiar with the situation say.
Other sectors have undergone rapid megamergers after two competitors combined and remaining companies sized up the landscape. Last year, the health-care insurance space saw two megamergers in quick succession after Humana Inc. put itself up for sale.
Aetna Inc. agreed to buy Humana for $34.1 billion in early July 2015. Just a few weeks later, Anthem Inc. struck a deal to buy Cigna Corp. for more than $48 billion.
The semiconductor space has had a similar reshaping. Last year marked the highest volume for semiconductor M&A, marked by record deals such as Avago’s $37 billion deal to buy Broadcom and Intel Corp.’s $16.7 billion deal to buy Altera.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com, Dana Mattioli at
dana.mattioli@wsj.com and Keach Hagey at
keach.hagey@wsj.com