Introduction
I think the spread between AT&T's (NYSE:T) offer price for Time Warner (NYSE:TWX) and its current price represents a good opportunity. This is a little different from what most of my articles have been and will be about in the sense that this is a special situation, whereas I mostly like to write about long-term investment opportunities. Nonetheless, I saw this deal and liked the reward relative to the risk. Whether the time period is 1 year or 10 years, I don't think I should pass up a good opportunity.
Time Warner has agreed to be acquired by AT&T for about $85 billion, or $107.50 per share. The deal is structured so that TWX shareholders will receive 50% in cash ($53.75 per share) and 50% in AT&T stock. The stock portion is subject to a collar, and I will go through the numbers on that in a little bit. This is a significant premium to TWX shares today, which trade at just under $87 as I write this article.
