Disney Could Have Bought Time Warner in 2016 - The New York Times

What if Time Warner had gotten a fateful phone call earlier in 2016?

What could have been

After its $100 billion deal to buy Time Warner, and spending millions more to fight a Justice Department lawsuit that delayed the deal, AT&T wants a do-over. The Times has the definitive account of the negotiations that led to the phone giant’s reversal — code names, emoji-speckled emails, artisanal doughnuts, a gun-toting Steve McQueen and a cramped Greenwich Village townhouse all play a part — culminating in the announcement last week that it would spin off WarnerMedia, as the former Time Warner is now known, to merge with the reality TV giant Discovery.

Our reporting uncovered other intriguing details about the situation back in 2016, when AT&T first approached Time Warner about a deal.

It could have been different if a phone call had come just a few weeks earlier. In October 2016, shortly before Time Warner and AT&T announced their deal, Bob Iger, the head of Disney at the time, placed a call to Jeff Bewkes, the chief of Time Warner, according to two people intimately familiar with those details. The Disney leader asked Bewkes if he’d be interested in a possible merger. It was too late, Bewkes said. There was already something in the works. Iger wished him well and hung up the phone. Later, Iger called another media chief in the hopes of forging a deal. It was Rupert Murdoch.

A quick review of the saga of WarnerMedia under AT&T. In the three short years since the telecommunications company finally closed the deal, AT&T radically upended the business by cutting staff, angering the talent and firing executives and becoming something of a Hollywood villain. Some of WarnerMedia’s most successful executives, including Richard Plepler of HBO, left or were pushed out. The company cut over 2,000 jobs.

The Discovery deal involved a who’s who of media power players. AT&T’s John Stankey and Discovery’s David Zaslav had to convince bigwigs like John Malone of Liberty Media and Steven Newhouse of Advance of the merits of the deal, engaging the dealmakers Aryeh Bourkoff of LionTree and Kurt Simon of Goldman Sachs to make it work. The companies also had to arrange a bridge loan worth more than $40 billion: JPMorgan Chase, which advised Discovery, provided more than half the financing, since Goldman was limited in how much it could lend out. A last-minute leak about the merger — when Zaslav was midflight on a private jet heading from New York to Dallas to seal the deal at AT&T’s headquarters — added drama to the negotiation just as it reached the final hurdle.

Read the full story: “Inside the Discovery-AT&T Deal: Cute Emails, a Big Loan and Now, a Media Giant” by John Koblin, Michael M. Grynbaum, Edmund Lee and Lauren Hirsch

HERE’S WHAT’S HAPPENING

Belarus draws outrage by intercepting a commercial airliner. The country’s forced diversion of a Ryanair plane bound for Lithuania, which was escorted by a fighter jet to Minsk to seize a dissident journalist onboard, prompted international criticism of Belarus’s president, Aleksandr Lukashenko. Analysts said they expected strong responses by governments and airlines in response.

The Apple-Epic trial comes to an end. Closing arguments in the antitrust trial are set for today, in which the presiding judge will query each side about their cases. It comes after Tim Cook, Apple’s C.E.O., testified on Friday, asserting that his company wasn’t abusing its control of its App Store. The ruling may not come for months.

U.S. Covid-19 cases fall to a 12-month low. The country is seeing fewer than 30,000 cases a day — levels unseen since last June — with credit being given to ongoing vaccination efforts. Separately, a U.S. intelligence report said that three researchers at the Wuhan Institute of Virology were hospitalized in November 2019, potentially reraising concerns about Covid-19 escaping from that lab.

Hopes dim for bipartisan agreement on infrastructure. Doubts expressed by Senator Susan Collins, Republican of Maine, over the White House’s recently reduced infrastructure proposal suggest partisan disagreements may be too wide to bridge. That casts the focus on whether moderate Democratic senators would let President Biden pass the plan strictly along party lines.

Masa Son joins calls to postpone or cancel the Tokyo Olympics. The billionaire founder of SoftBank cited Japan’s lagging vaccination rate and the spread of coronavirus variants as reasons to call off the already-delayed games. Son’s comments came after an International Olympic Committee official pledged to go through with the competition even if Tokyo were put into lockdown.

Clouds cover crypto

Over the weekend, the price of Bitcoin briefly fell to around $31,000, more than 50 percent down from its high last month, and other cryptocurrencies suffered too. (It’s currently trading at around $37,000.) Many market watchers point to rumblings from regulators around the world as a factor in the turmoil.

“About $20 billion of long positions were liquidated last week,” Sam Bankman-Fried, the C.E.O. of the crypto derivatives exchange FTX, told DealBook. “In terms of price movements: the biggest part of it is liquidations,” he said, suggesting the worst is over. But he also noted news from China late Friday of a crackdown on Bitcoin mining and trading. This added to other news of official scrutiny that has spooked crypto investors in recent days:

Financial regulators in Hong Kong announced support for a legislative proposal to create a licensing scheme for virtual asset exchanges and to ban trading for investors without a minimum of $1 million in their portfolios.
The Bank of Canada cited crypto concerns in its annual financial system review, saying that “the rapid evolution in cryptoasset markets is an emerging financial vulnerability.”
Gary Gensler, the chair of the S.E.C., said that American regulators “should be ready to bring cases” involving wrongdoing in crypto markets.
The Treasury Department noted in a report on tax proposals that “cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.” The I.R.S. said it would require more extensive reporting of crypto transactions.

Companies with Bitcoin on their balance sheets may be getting nervous. For accounting purposes, crypto is valued at its purchase price. If it goes up in value, this isn’t reflected in a company’s accounts but if it falls, the value is impaired and puts a dent in quarterly profits. Let’s check in on the three big corporate Bitcoin holders — Tesla, MicroStrategy, and Square — shall we?

Tesla: The electric vehicle company bought $1.5 billion in Bitcoin last quarter, at an average price of about $34,700 per coin, not far from its current price. Elon Musk has signaled that Tesla isn’t selling, but it probably isn’t buying, either.

MicroStrategy: The business intelligence software company has spent about $2.2 billion on Bitcoin, at an average price of $24,450. The company bought more last week and is still sitting on big gains.
Square: The payments company, led by the Twitter C.E.O. Jack Dorsey, bought two batches of Bitcoin for its treasury — $50 million in October at a price of about $10,600 and $170 million in February at a price of around $51,000. It took a $20 million impairment on its holdings last quarter, stemming from the drop in value from its most recent purchase. It doesn’t plan to buy any more, its C.F.O. said this month.

“Yeah, I do.”

— Barry Diller, when asked by Andrew on CNBC’s Squawk Box whether he thinks Disney’s C.E.O., Bob Chapek, has pushed his predecessor, Bob Iger, to the sidelines, as he suggested earlier in the interview. (And “not very nicely,” per Diller.)

Lazard enlists an admiral

The investment bank Lazard has hired William McRaven, the retired Navy admiral who led the U.S. Special Operations Command, as a senior adviser for its financial advisory business. McRaven oversaw the raid that killed Osama Bin Laden.

His hiring underscores business’ concerns about geopolitics. The pandemic has highlighted the potential business risks of global interconnectedness and China’s increasing assertiveness, among the many fault lines that multinational companies face.

McRaven is the latest financial outsider to join Lazard. Memorably, the firm hired the late Vernon Jordan, the civil rights leader with a gold-plated Rolodex, in 2000. “It’s not a place that is big on golfing,” said Peter Orszag, the head of financial advisory at Lazard, himself a veteran of the Clinton and Obama administrations. Bringing such people on board brings both intellectual “content” and deep relationships around the world, Orszag said.

SPACs under scrutiny on Capitol Hill

Over the past year, special purpose acquisition companies, or SPACs, have boomed in popularity as a way to take start-ups public. (That is, until recently.) At a hearing today of the House Subcommittee on Investor Protection, expect lawmakers to ask whether these shell companies present more risks for retail investors than previously understood.

SPACs are a tale of “two starkly different worlds,” Stephen Deane of the CFA Institute, an investment professionals standards group, will say, according to his prepared testimony: big profits for Wall Street firms and “a track record of dismal returns for ordinary investors.” The venture capitalist Scott Kupor of Andreessen Horowitz, another expert testifying at the hearing, notes that SPACs have increasingly underperformed against the S&P 500.

Lawmakers may amend securities laws to protect investors in SPACs. One idea is to hold SPAC sponsors more responsible for promises they make in the forward-looking statements they make to support their deals. (In a memo, members of the subcommittee suggested that it’s time to end the uncertainty around liability.) Kupor suggested that Congress and the S.E.C. conduct further studies into the merits of additional disclosures around such deals, though he added that markets have already prompted changes in how SPACs are structured.

THE SPEED READ

Deals

Saudi Arabia hopes to raise about $55 billion from a series of privatizations, including the sales of TV broadcasting towers and hotels. (FT)
The outlook for huge leveraged buyouts is brighter than it has been in years, according to a top Goldman Sachs banker. (Bloomberg)
Why top hedge funds are betting on a tiny Danish oil producer. (FT)

Politics and policy

Representative Tom Malinowski, Democrat of New Jersey, defended a string of well-timed stock trades that he made last year. (NYT)
President Biden isn’t planning on banning red meat, but activists say his greenhouse gas policies don’t do enough to curb the livestock industry’s role in climate change. (Politico)

Tech

Jack Ma reportedly plans to step down as the president of the elite business academy he founded, as his business empire continues to face pressure from Beijing. (FT)
“Amazon Already Built a Studio. Why Does it Want to Buy MGM?” (Bloomberg)

Best of the rest

Entrepreneurs are racing to create cannabis start-ups — but face a shortage of legally grown marijuana. (NYT)
Remember the “Charlie bit my finger” viral video? It just sold as an NFT for over $760,000. (Insider)
At age 50, Phil Mickelson is the oldest person ever to win the P.G.A. Championship. (NYT)