October 26, 2016
As reported by USA Today, on Saturday, October 22nd, AT&T and Time Warner made a deal which outlined AT&T to purchase the communications company for $85.4 billion. Details in the cash and stock deal include that AT&T will pay $107.50 per share of Time Warner whose service includes HBO, CNN, TNT, TBS, Warner Bros, Bleacher Report, theme parks, and a 10% stake in their premier streaming service Hulu. Bugs Bunny is making a move—and will likely settle into his new home by the end of 2017.
This kind of merger/acquisition activity is nothing new to Wall Street or its investors. Industry executives cite moves like this in the name of innovation, efficiency, and enhanced service to customers. In this scenario the acquisition leverages the distribution platform of AT&T and the valuable content from Time Warner which creates the ultimate entertainment package for customers all over the world.
But this deal will be highly scrutinized by regulators- the most recent deal similar to this was the 2009 Comcast acquisition of NBC Universal.
However, taking a look at the top mergers in 2016 there have been ample opportunities for investors to benefit from this kind of corporate movement. If you are a shareholder of the company being acquired OR if you already own the company that is making the acquisition there may be a positive reflection in the stock price as the deal time-frame comes to a close. In addition, depending on how the deal is structured you may end up owning shares of a new company that is a great add to your portfolio for diversification, strong dividend, etc.
While not every merger or acquisition is successful it is worth discussing these opportunities with your advisor to assess what is suitable for your portfolio.
The timing of this “Bugs Bunny” announcement couldn’t be a better example to illustrate that regardless of what is going on in the world, including a Presidential Election, there are still opportunities to make money, diversify your portfolio, and position yourself for greater growth potential in the long run.
Caroline Hill, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).