AT&T, Inc. is saying that their acquisition of Time Warner, Inc. will produce all kinds of synergies between the businesses of the two companies. However, not everyone believes this will happen as a prominent fund manager thinks AT&T is paying too much.
Zacks Investment Management President Mitch Zacks tells Fortune that he is skeptical with a lot of AT&T's claims on why they purchased Time Warner. Zacks company owns approximately $60 million worth of AT&T stocks.
Zacks said that AT&T will have a hard time finding enough synergies to justify the premium that they are paying for Time Warner. "Essentially, what is happening is AT&T is paying more for Time Warner than any other entity is willing to pay," he said.
He adds that the company is overpaying for Time Warner. "It's paying more than even Apple was willing to pay, and it's paying a lot more than what the market is saying it's worth," he said.
Zacks said that the only way for AT&T to justify the price it's paying for Time Warner is to find cost synergies. This means that AT&T either generates additional revenue due to the acquisition or cuts cost enough to pay for the premium price.
Another person who is not optimistic about this merger is Recode Executive Editor Kara Swisher. She wrote in an article in Recode that the AT&T-Time Warner merger is no different from the failed merger between Time Warner and AOL in 2000.
Swisher said that the attitudes of current Time Warner CEO Jeff Bewkes and current HBO head Richard Plepler during their company's merger with AOL was the reason the deal didn't push through. Bewkes, who ran HBO at that time, and Plepler, who ran the PR for HBO, didn't believe in what AOL was selling at that time.
She adds that Bewkes and Plepler were adamant back then that content will always prevail and that it was still the king. "The question is, are people really going to watch what we make on a computer screen or not," said Bewkes.
Bewkes today, though, is singing a different tune, according to Swisher. Bewkes said that their combination with AT&T will allow them to deliver their brands and content on a multiplatform basis and capitalize on the growing demand for video content.
Swisher, though, is not yet convinced that things are different today. She guesses that the kind of thinking that Bewkes had in 2000 will come out again in this merger with AT&T as the media types in Time Warner realizes that they are now working for a phone company.