LONDON, UK / ACCESSWIRE / March 16, 2017 / Active Wall St. blog coverage looks at the headline from AT&T Inc. (NYSE: T) and Time Warner Inc. (NYSE: TWX). The European Commission gave its approval on March 15, 2017, for the merger between telecom giant AT&T and media and entertainment conglomerate Time Warner. The $85 billion merger was originally announced in October 2016. Register with us now for your free membership and blog access at:

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The European Commission's statement read:

"The Commission concluded that the proposed acquisition would not raise competition concerns, because there are no overlaps between the parties' activities in the European Economic Area."

Sharing his thoughts on the development, Bob Quinn, Senior Executive Vice President, AT&T External and Legislative Affairs, said:

"This is an important approval from a highly respected authority. The global clearance process is on track, and we look forward to creating a Company that will lead the next wave of innovation in the media and telecommunications industries."

Key highlights of the AT&T and Time Warner merger

The AT&T and Time Warner merger was announced in October 2016. Under terms of the agreement, AT&T would acquire Time Warner in a stock plus cash deal of $107.50 per share. The deal has a total equity value of $85.4 billion and a total transaction value of $108.7 billion, which includes Time Warner's net debt. On completion of the merger, Time Warner shareholders will own between 14.4% and 15.7% of AT&T shares on a fully-diluted basis. AT&T had planned to finance the deal using cash in hand and fresh debt.

The merger would see Time Warner as the content provider with its treasure trove of films and TV programs plus the resources and ability to generate more content. AT&T, on the other hand, has an unrivalled network of customers across the all screen sizes, may it be a TV, a mobile, or any other device connected via broadband internet. The combination would result in a telecom, media, and entertainment giant that has a wide spectrum of services and products to offer to its customers under a single roof.

Some key financial benefits of the deal

The financial benefits of the deal are also significant for AT&T. The deal is expected to result in cost synergies $1 billion annually within three years of finalization of the deal. Within the first year of the finalization of the deal, AT&T expects net debt to adjusted EBITDA to be in the 2.5x range. AT&T will also manage to increase its dividend coverage. Given Time Warner's low capital business, AT&T will add a diversified revenue stream to its business without major capital spending. On finalization of the deal, revenues of Time Warner's business will represent about 15% of the combined Company's revenues.

Closing the last mile gap

The European Commission's approval brings the AT&T and Time Warner merger closer to fruition. The Board of Directors of both AT&T and Time Warner had already approved the deal at the time of signing the merger agreement. Time Warner's shareholders gave their approval to the deal in February 2017. The final hurdle that remains in the path of the merger is getting the approval of the US Department of Justice's anti-trust division. After reviewing all the relevant documents submitted by both AT&T and Time Warner, the Anti-trust division of the US Justice Department has to prove that the proposed merger does not harm the competition. In case AT&T manages to get the approval in time, the deal is expected to close by end of FY17.

Stock Performance

On Wednesday, March 15, 2017, the stock closed the trading session at $42.59, rising 1.19% from its previous closing price of $42.09. A total volume of 16.36 million shares have exchanged hands. AT&T's stock price advanced 4.78% in the last three months, 9.11% in the past six months, and 15.90% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 1.30%. The stock is trading at a PE ratio of 20.30 and has a dividend yield of 4.60%. The Company's shares have a market capital of $262.31 billion.

Time Warner's share price finished yesterday's trading session at $98.74, slightly advancing 0.39%. A total volume of 2.78 million shares exchanged hands. The stock has surged 30.29% and 41.83% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 2.72%. The Company's shares are trading at a PE ratio of 19.93 and have a dividend yield of 1.63%.

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