You know there is always something. Just as we at Quad 7 Capital are out with the opinion that the merger between AT&T (T) and Time Warner (TWX) appears to be moving along and the company will address its debt and the fears antitrust officials in Brazil have reiterated over the merger by selling off some Assets, the companies are out today saying no sales will occur, at least in the first response.
Let us remind you that we felt this was a done deal thanks to several moves made by management at AT&T. As we have discussed these at length prior we will only briefly revisit these items. The real first sign was the shaking up management, moving a number of key executives around and creating new segments to usher in the content and team from Time Warner. Second, was this year’s largest corporate bond sale, which is being done to help pay for the deal. The key indicator from the first piece of news was the appointment of John Stankey to take on the lead of the Time Warner integration team, and in this role, he is working with Time Warner CEO Jeff Bewkes to plan for a transition of Mr. Bewkes to assume lead of AT&T’s new media company post-merger. As for the new debt being taken on the merger is costing in the ballpark of $85 billion, so AT&T is raising about $22.5 billion through a seven-tier bond offering. This is a serious amount of cash being raised for an already debt laden company. As we have said before, you simply do not do these types of things there was doubt over the merger coming.
But Brazil is still playing hard ball. Let us remind you that Colombia and Ecuador have already signed off. AT&T and Time Warner are encouraging an unconditional approval as they feel there are no threats to competition. They also feel Brazil’s relationship is the same as the aforementioned companies when it comes to exposure so it should get approval. Instead of divestitures, AT&T and Time Warner might change how they operate a bit to encourage competition, but are refusing sales as a way to make the merger happen.