AT&T has finally crossed the finishing line and acquired Time Warner, following a two-year protracted battle. As the final legal hurdle to the merger between AT&T (NYSE:T) and Time Warner has been cleared on 13 June, different stakeholders had starkly different reactions. While the management of AT&T and of Time Warner were exhilarated, investors of AT&T dumbed the stock, pushing it down more than 6% - one of it's deepest one-day drops since the financials crisis. Shareholders of Time Warner were not too thrilled neither; the share price increased by only 1.8% to $98, still well below the $107.5 initial bid price from AT&T.
And who can blame the shareholders on both sides? For the shareholders of Time Warner; every drop in AT&T’s share price has been a drop in their own payout. For the shareholders of AT&T; they will be diluted by new shares issued to Time Warner’s shareholders, and the combined entity will be carrying around $ 180 billion of financial debt at the conclusion of the deal, compared to $ 115 billion of net debt on AT&T’s balance sheet on 31 March 2018. Moody's almost immediately cut AT&T's credit rating to BBB - two notches above junk - and warned that AT&T will likely need to cut its dividend, slowdown its capex and sell assets, in order to avoid further rating downgrades, and possible financial distress.
