I’ve gone a bit bonkers attempting to figure out how the financing of this mega-deal might work. I’ve played with several trial balance sheets and income statements using various amounts in AT&T shares and sums of cash. I related the numbers to revenues and interest costs and even included some $2 billion in annual synergy savings, and my conclusions are impressively positive. However, I am not confident with my numbers and feel I’m missing data. Certainly, the combination of T with TWX could have explosively exciting potential. But the large amount of shareholder dilution (and I don’t know how much just yet) necessary to acquire TWX could hurt free cash flow, which is what secures T’s dividend and its growth. Several analysts who have applied their data and assumptions to this buyout and have posited balance sheets and income statements have produced results ranging from quietly negative to extremely positive.
Still, I can’t answer the question with the comfortable certainty you need. So I suggest that we recognize that both CEOs are really smart guys and have staff working for them who are also RSGs. And the boards of AT&T and Time Warner have RSGs with enviable national reputations who are now publicly tasked to make this work. I trust these people. The biggest problem is Congress and a harridan named Sen. Lizzy Warren. Lizzy (rhymes with dizzy) may direct bureaucratic roadblocks to scuttle the deal, claiming the merger would concentrate too much power in the hands of too few. Today’s consensus is that Congress won’t allow the merger. So stay the course, continuing to earn a 5.2 percent dividend, and T’s price will rise. If the deal succeeds, trust the professionals who put it together for shareholders’ best interest. And I like Verizon (VZ-$48).
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at email@example.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
COPYRIGHT 2016 CREATORS.COM
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