AT&T Buys Time Warner

AT&T announced that it had agreed to purchase Time Warner for about $85 billion. Under the terms of the deal, Time Warner shareholders will receive $107.50 per share, half in stock and half in cash. The share price represents about a 20 percent premium to Time Warner's closing price on Friday. Even though the terms of the deal have been announced, Time Warner shareholders and the Department of Justice still must approve the deal, and the chair of the Senate subcommittee on antitrust said the committee would examine the deal as well. Of course this is not the first time that Time Warner has been acquired: In 2000, AOL purchased Time Warner for $160 billion in one of the worst deals in history. In fact, the company had a $99 billion loss in 2003 and things went so bad, the merged company eventually changed its name back to Time Warner.

Ethics In Finance

You may have noticed that there is not a lot of discussion of ethics in your textbook. A major reason is that from a financial view, if the market or society values ethical behavior, unethical behavior by a company will hurt its market value, thus defeating the goal of maximizing shareholder value. Consider the case of Wells Fargo, which is under fire for fraudulently creating up to 2 million deposit and credit card accounts. In addition to the fines paid by the company, last week, California announced that it was barring state transactions with Wells Fargo, including underwriting state bond issues. Today, Chicago announced that it was divesting $25 million that it has invested with Wells Fargo and next week Illinois plans to announce its plans to suspend Wells Fargo from the state investment network. So, while Wells Fargo may have temporarily increased value by fraudulent actions, these actions will now negatively affect shareholder value.