Time Warner Insiders Swoon Over Sale Price in AT&T Deal

Time Warner employees have long expected that the company behind Warner Bros., HBO, and CNN would one day be sold. After all, Jeff Bewkes had spent much of his time as CEO shrinking Time Warner, spinning off Time Warner Cable, shedding AOL, and casting aside its Time Inc. publishing unit. All of those moves made Time Warner more easily digestible.

So the announcement this week that AT&T was swooping in to buy the company for $85.4 billion wasn’t exactly a surprise. Around the company’s Burbank lot and New York corporate offices, most employees are cautiously optimistic that the sale to the telecom giant is the best possible outcome. That’s largely because AT&T has been busy providing wireless services instead of creating content.

There are fewer redundancies, and likely fewer job cuts, than if Time Warner had been purchased by 21st Century Fox or even Google, insiders reason. That had been one of the major concerns when Fox’s Rupert Murdoch launched an unsolicited takeover bid for Time Warner two years ago. Had Murdoch been successful, there would likely have been a wave of job cuts across the film and television divisions, setting up a Darwinian struggle to survive.

To get a sense of the mood following the blockbuster deal announcement, Variety surveyed more than a half-dozen Time Warner executives, as well as several industry insiders, all of whom asked to remain anonymous. Many top executives weren’t even formally told that a merger was in the works until Saturday afternoon. Bewkes broke the silence in a video taped message to Time Warner’s 23,000 worldwide employees, in which he suggested that the company would continue to operate with autonomy as a subsidiary of AT&T.

“Importantly, the driving force for the transaction is not cost savings, it’s growth opportunities,” Bewkes said in the four-minute video.

He went on to argue that the union of the two companies will make them both stronger competitors in a fast-changing video landscape.

“We’ll be in an even stronger position to go where our audiences are going,” Bewkes said. The deal envisions “a world of ubiquitous video on demand across all platforms and all devices. Joining forces with AT&T gets us there faster and better than either of us can do on our own.”

Time Warner employees were heartened by statements made by AT&T chairman-CEO Randall Stephenson over the weekend that hinted that he was eager to retain the management teams at HBO, Warner Bros., and Turner. On a conference call with press, Stephenson stressed that he had made it clear to Bewkes that “…the talent that he had assembled is a really important part of this deal and that it is going to be really critical that he make sure that we have continuity of the team that he has built.”

Another Warner Bros. employee did not discount the idea that a management review, down the road, could lead to staff reductions. But that prospect seems less worrisome than under some other acquirers.

“I don’t think they are buying it to dismantle it,” said the employee. “I think they are buying it to mine it and to grow it as best they can.”

For long-serving Time Warner employees holding stock in the company, news of the AT&T deal was cause for celebration — assuming the deal closes. AT&T’s $107.50 a share offer is a roughly 36% premium over the stock’s recent trading price prior to its run-up on merger speculation last week. Those who have had options granted at a lower price are poised for an even bigger windfall.

All of that comes as sweet relief for longstanding employees who suffered through the AOL merger 15 years ago. The stock that topped $100 early on wound up plunging as low as $8, rendering employee grants and options worthless.

One source noted that there would also be potential for new opportunities for Time Warner employees now that AT&T’s DirecTV, wireless and high-speed Internet services are coming under the same roof. The feeling among mid-level insiders is that AT&T is a “real company with real earnings” and not a gamble on future promise as was the case with AOL.

Even though some employees may be eyeing a financial windfall, there are broader industry concerns. Filmmakers and showrunners who have projects lined up at Time Warner are worried that things could be delayed or put on hold while the deal waits for regulatory approval. They’re eager to get assurances that their films and programs will move forward, as they did when NBCUniversal waited for the government to give its blessing to its sale to Comcast.

There are already some signs that the pact with AT&T could draw a lot of Beltway attention. Donald Trump has said that he opposes the merger and Democratic vice-presidential nominee Tim Kaine also expressed concerns. One Time Warner executive said he doubted the sale will be a regulatory “lay-up” and joked that he’s not ready to change his Verizon account to AT&T just yet.

Debra Birnbaum, James Rainey, and Claudia Eller contributed to this report.

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