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Today’s Trading Edge: AT&T agrees to acquire Time Warner for $107.50 a share in half stock and half cash deal valued at $85.4 billion

Posted by WorldWideMarkets . on Oct 23, 2016 8:57:06 PM

WWM T OCT 23 2016.jpg

AT &T Inc (T) shares fell 3.0% to $37.49 at the end of last week on speculation the telecommunication giant was considering acquiring Time Warner.  Earlier on Friday, Apple was reportedly also considering a bid for the media company.  On Saturday, AT&T said to agree on a half cash/half stock deal to acquire Time Warner for $107.50 a share.  The total deal would be valued at $85.4 billion. 

AT&T reason for acquiring Time Warner was to a converge a media and communication company.  They especially were interested in acquiring Time Warner’s media lineup, which includes networks such as CNN, TNT, the prized HBO channel and Warner Bros. film and TV studio. 

The merger is subject to approval by Time Warner Inc. shareholders and review by the US Department of Justice. AT&T and Time Warner are currently determining which FCC licenses, if any, will be transferred to AT&T in connection with the transaction. To the extent that one or more licenses are to be transferred, those transfers are subject to FCC review. The transaction is expected to close before year-end 2017.

Price action on the AT&T daily chart shows that price is tentatively in freefall after breaking below the 200-day SMA average which currently trades at $39.44.  If the bearish move continues, we could see price find support from the $36.00 level. 

If the price is able to recapture the psychological $40 level, key resistance will come from the $41.50 region. 

The Trade: Buy T at $36.25, with a stop loss at $35.25 and a take profit at $39.25.  The Risk/Reward Ratio is 1:3

Topics: Stocks, Equities, US equities


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