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AT&T’s Time Warner Deal Comes at a Huge Cost

The first rule of mergers is don’t do a deal with Time Warner. The second rule, as they say, is that there is only one rule.

On Saturday, AT&T (T) broke that rule, announcing it was going to buy Time Warner (TWX) for $85.4 billion, or $107.40 a share. Time Warner’s last big deal, of course, was a doozy. Back in 2001, AOL agreed to buy Time Warner for $112 billion, in a deal that merged a content provider with what was then the leading provider of access to the Internet. It was supposed to be a competition killer. Instead, the deal killed the combined company and nearly all of the executives who forged it, which is now remembered as possibly one of the worst corporate combinations of all time.

Before that, the deal that merged Time Inc. (Fortune’s publisher) with Warner Brothers wasn’t much better.

Oddly, the logic of AT&T’s proposed acquisition of Time Warner is not far off from the rational behind the AOL deal—though this time around, at least for now, it’s more about delivering paid TV content. But TV and the Internet are quickly becoming one, and AT&T is a big player in providing online access as well. So, you know, same thing. Despite the bust of the 2001 Time Warner deal, AT&T would be far from the first to follow AOL down a similar path. Comcast bought NBCUniversal in 2012, and Verizon’s recent deals with AOL and Yahoo! could be seen as a similar move.

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AT&T’s deal values Time Warner at 22 times the cash it generated from its operations. That seems high. When Comcast bought NBCUniversal in 2013 it paid around 8 times operating cash flow. When Verizon bought AOL in 2015, a number of commentators suggested that it had paid through the roof for the former Internet whiz kid. But even in that deal, Verizon only paid about 9 times AOL’s adjusted operating income.

And it’s not clear what AT&T is paying up for. Time Warner certainly has some prized assets, such as paid TV provider HBO and the Warner Brothers movie studio. Even CNN has shown some life recently during the election, after being stuck for years.

But overall, the business has shown little growth. Time Warner’s revenue fell 2% in the first six months of the year. The company’s bottom line was up slightly.

Time Warner CEO Jeff Bewkes has done a good job of turning around Time Warner from its disastrous merger with AOL and its lackluster aftermath. But Bewkes’ success has been in shirking Time Warner, shedding first Time Warner Cable, and more recently Time Inc. (TIME), as well as pawning off unwanted debt on its castoffs not growing the company.

When Bewkes rebuffed 21st Century Fox’s takeover offer a few years ago, at a lower price of $85 a share, he said at the time it was not clear to him that bigger is better in media. Bewkes is now getting praise for nabbing a much higher per share price. But like he said, bigger—even when it comes to price—is not always better. And if it turns out AT&T overpaid for Time Warner again, it may be time to go back to the mergers rule book.