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Product cover image for The $85.4 Billion Merger of AT&T and Time Warner: Valuation Analysis

The $85.4 Billion Merger of AT&T and Time Warner: Valuation Analysis

Xiaokang Zhao; Zhichuan (Frank) Li

Product #:9B19N022_P
Supplier:Donghua/Ivey
Discipline:Finance
Setting:United States, 2016
Details:Case (PDF) • 11 pages • 2019-11-26 (Rev: 2020-04-25)

Subjects:

Mergers and acquisitionsCorporate strategyFinance and investing

Industries:

Information technology and telecom sector

Geography:

United StatesNorth America
Your Price:$9.71

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On October 22, 2016, U.S. telecom operator AT&T Inc. and television media giant Time Warner Group announced that AT&T Inc. would acquire Time Warner Group for $107.50 per share, using half cash and half stock, to a total equity value of $85.4 billion. Although the chief executive officers from both companies were very confident about the future prospects for their shareholders once the transaction was approved and completed, there was much controversy surrounding the acquisition. A portfolio manager with a significant portion of her investment portfolios tied up in AT&T Inc. equity wondered if the price was fair. She needed to make a thorough valuation analysis to ensure that she could anticipate the future value of the merged firm and mitigate any possible loss in value for her investors.

Learning Objectives

This case is suitable for both postgraduate- and undergraduate-level courses in business administration, as the first case study for beginners in the area of business valuation. It is mainly applicable to discussions of the time value of money, stock valuation, and corporate value assessment in courses on financial management, corporate valuation methods, analysis of corporate business activities, and asset assessment. After working through the case and assignment questions, students will be able to
  • explain the mechanisms of the popular mergers and acquisitions valuation methods;
  • analyze and understand the assumptions of various mergers and acquisitions valuation methods; and
  • compare applicable conditions of various mergers and acquisitions valuation methods and their advantages and disadvantages.
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    Case Study: The $85.4 Billion Merger of AT&T and Time Warner: Valuation Analysis | Ivey Publishing