Finance

2016: Deals, Deals and More Deals

AT&T-Time Warner leads what has been a strong year for M&A 12/21/2016 1:06 PM Eastern

The cable deal market continued to roar in 2016, with content dominating what had been thought to be just a year before a distributors game, as AT&T’s pending $108.7 billion acquisition of Time Warner Inc. threatened to pave the way for continued vertical integration in the industry.

 

AT&T’s hefty deal for Time Warner led the pack in a year that saw several big transactions. The $108.7 billion price tag -- $107.50 per share plus debt – outshone what had expected to be the largest deal of the year, Charter Communications’ $80 billion purchase of Time Warner Cable (no affiliation)  and its $10 billion buy of Bright House Networks. Charter closed those two deal on May 18, creating a new No. 2 in the cable universe – behind Comcast – with more than 17 million subscribers. The deals capped what had been a three-year odyssey for Charter – it first made overtures to TWC in 2013 – ending with the two reaching an agreement in May 2015. 

 

Distribution deals had seemed like they would rule the day in 2016 – the third largest deal of the year was European telecom company Altice N.V.’s $17.7 billion purchase of Cablevision Systems, which closed in June. Altice had previously closed on the $9.1 billion purchase of Suddenlink Communications in December 2015, creating Altice USA, its domestic cable operations. Although Altice is expected to be a player in the deal market in the coming years – late in the year it said it was exploring a possible initial public offering for a portion of Altice USA – it has said it will focus on integration an execution for the time being.

 

Frontier Communications also completed its $10.5 billion deal to buy some Verizon Fios properties in California, Texas and Florida in April.  Although that purchase was marred by outages shortly after the official switchover, Frontier has ironed out those problems.

 

 

Other big deals struck during the year include Liberty Global’s Dutch cable operation Ziggo’s $7 billion joint venture in the Netherlands with European wireless giant Vodafone; and Verizon Communications’ $4.8 billion purchase of search pioneer Yahoo.   That latter deal could be in for a revision – Yahoo’s announcement of data breaches involving more than 1 billion accounts at its email service is getting close scrutiny from Verizon. According to some reports, Verizon is looking at either reducing the purchase price or scrapping the deal all together.

 

But though consolidation didn’t necessarily sweep through the cable business as expected – the Charter and Altice deals were announced in 2015 – programmers seemed to take up the slack.

 

Vertical integration – owning content and distribution in one company, thought just weeks earlier to be off the table, did an about face after the AT&T-Time Warner deal was announced.

 

With the coming of a new, possibly more business-friendly Presidential administration in January, some analysts believe paring content and distribution will gain prominence.

 

In addition to AT&T-Time Warner, several programming deals crossed the transom in 2016, including Lionsgate Entertainment’s $4.4 billion purchase of premium channel Starz; Liberty Media’s $4.4 billion purchase of motor racing icon Formula 1 for $4.4 billion and Comcast’s $3.8 billion purchase of DreamWorks Animation.

 

 

The tech sector also was quite active during the year, with CenturyLink’s $34 billion purchase of Level 3 Communications, Microsoft agreeing to buy LinkedIn for $26.2 billion;  Rovi’s $1.1 billion deal to purchase TiVo and others.

 

And one big deal that was expected to emerge in 2016 was squashed before it ever happened – Viacom’s expected recombination with former corporate sister CBS.

 

The deal had been rumored to be in the works for months and in September, the controlling shareholder for both companies – National Amusements, run by media mogul Sumner Redstone – had asked both boards of directors to investigate a merger.

 

That deal was expected to happen by the end of the year, until National Amusements pulled the plug, asking Viacom’s and CBS’ respective boards to cease talks. Merger discussions between the two officially ended on Dec. 12.

 

 

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