Can someone please explain what the GHL/Evercore bankers were smoking when they allowed AT&T put a $3bn break-up fee with no anti-trust contingency in the definitive? O did some analyst make the typo of the century in v162 and no one caught it?
I hope at least the bankers were smart enough to put some anti-trust contingency in their own engagement letters...seems like the AT&T legal dept will agree to anything so perhaps they were able to.
Were/are they really that confident about anti-trust? If the breakup fee was supposed to be a deterrent to the govt, seems like a very strange tactic, like saying to the, "don't give me a speeding ticket or ill drive my car into a tree."
If DOJ was really so concerned about anti-trust, maybe they should look into the existing state of the industry. Its already a price-fixing oligopoly...does anyone else find it ridiculous to have to sign on to a minimum of 450 minutes and no carriers offer a cheaper/more competitive monthly plan? Who even uses voice minutes any more?
Would love to hear some color from those more familiar with the industry
On another unrelated note...i hate AT&T's service and cannot wait to switch to verizon...
Good questions. I have no answers. Can you post the source of the 3b figure?
^^ Any news source. The breakup fee was widely reported when the deal was announced back in March (or whenever it was).
Yes.....300MM is the figure I remember reading
http://dealbook.nytimes.com/2011/03/20/att-to-buy-t-mobile-usa-for-39-b…
"The breakup fee in the deal is $3 billion, nearly 8 percent of the deal’s deal value. Typically, such fees are around 5 percent of the value."
Sorry I don't mean this in a douche way, but I'm also pretty sure the WSJ also reported the 3B fee at the time of announcement.
I swore I heard the AT&T breakup fee was $6B the other day, but my memory is probably failing me. I was actually going to ask about that as well. Either way, it seems completely ridiculous to have that large of a fee with no anti-trust contingency, when from the beginning anti-trust was a question.
I've never worked on any big deals, but I would think it would make more sense to have a breakup fee of something smaller, maybe $250M in the case of unfavorable anti-trust ruling by DOJ and $3B fee for any other reason. Is this type of arrangement common?
I believe AT&T agreed to provide a $3B break-up fee and ~$3B worth of spectrum if the deal doesn't go through, which is probably where you're getting the $6B figure from.
I believe AT&T agreed to provide a $3B break-up fee and ~$3B worth of spectrum if the deal doesn't go through, which is probably where you're getting the $6B figure from.[/quote]
What is spectrum?
My impression was that in cases like these, the deal almost always goes through. It just becomes a question of which assets that AT&T will be forced to divest or sell off before the DOJ acquiesces.
I saw $7bn all in, either way it seems like its incredibly stupid that they would put up so much capital on such a risky transaction. When they acquired Cingular they became the largest wireless carrier in the U.S., you think that the DOJ will let you get larger? Maybe they thought they could win the court battle.
Geez, for some reason I thought it was $8bn all-in. Regardless, if/when this shit bombs someone is getting destroyed pretty pretty bad, lol.
I read something about $7 billion being the all-in cost ($3 billion in cash + other considerations). The value of the other considerations is probably where the different figures are coming from, as the value isn't really known.
As for why they're doing it, they were trying to entice T-Mobile to play ball. If this doesn't go through, T-Mobile would end up wasting a year sitting on their ass. They'd be in a lot of trouble if they didn't get substantial compensation for a year doing nothing, with only a few major players left in the industry. AT&T did it because the risk seemed worth it to become the largest mobile network in the country.
This. +1
So just to get this straight - the breakup fee is so significant because planning the sale will take such a large portion of t-mobiles time that their management will basically be paralyzed otherwise, so they must be compensated for this?
I would imagine that AT&T's mgmt would also be similarly encumbered.
Thanks for all the responses...
Sure AT&T will end up wasting time and resources if this doesn't go through, but as the acquirer, they were trying to convince T-Mobile to sell. The breakup fee is about allocating risk. It moves some of the risk of a failed deal from T-Mobile to AT&T. The fact that it was so high just meant that AT&T was willing to accept more risk than usual in order to try to get the deal done.
I can't get past the irony of the typo in the sentence asking if there was a typo...
.... that or you are a comedic genius!
It looks like even if T-Mobile found another buyer, where the profits are today, they'd lose $12 billion at the same multiple offered by AT&T. And who knows what could happen between now and the time they actually find another buyer. They could be the big losers, not AT&T.
http://www.bloomberg.com/news/2011-09-01/deutsche-telekom-losing-12-bil…
I think that this is extremely funny. Idiots
FYI, it's typically the lawyers negotiating and drafting the merger agreement. So no, it wasn't an analyst making a typo on v162.
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