American Funds' shareholders should be pleased by AT&T's ( T) $67 billion acquisition of BellSouth ( BLS), because the fund family is well-represented on both sides of the deal. On Sunday, AT&T -- which itself was recreated last year through a mega-merger involving SBC -- agreed to acquire BellSouth in a stock deal valued at $37.09 a share, an 18% premium to Friday's closing price of $31.46. BellSouth shares rose 11% Monday as several analysts praised the combination, while AT&T's stock fell 1.6%. The combined company will have a market capitalization of roughly $165 billion and annual revenue of more than $120 billion. As of the end of last year, the five funds with the largest percentage of BellSouth shares were all members of the American Funds family, managed by Capital Research and Management. And four of those funds were also in the top five when it comes to holding AT&T shares. Topping the list for both companies was the $78 billion American Funds Washington Mutual A fund (AWSHX), which held 3.29% of BellSouth's outstanding shares, representing 2.13% of the fund's assets. It simultaneously holds 2.25% of AT&T's public shares, totaling 2.36% of the fund, according to Morningstar. The $64 billion American Funds Income Fund of America A (AMECX) was the second-largest percentage BellSouth shareholder at 2.27%, or 1.89% of the fund's total assets. Morningstar also reports the fund owning 1.7% of AT&T, or 2.22% of the fund itself. Morningstar lists the other three American Funds with serious stakes in the deal as being the $82 billion American Funds Investment Company of America fund (AIVSX) (which holds 2.01% of BellSouth's shares, and 2.16% of AT&T's shares), the $60 billion American Funds Capital Inc BLDR (CAIBX) (1.3% BellSouth, 1.08% AT&T) and the $52 billion American Funds American Balanced (ABALX) (1.28% BellSouth, 0.5% AT&T).
In terms of fund concentration, utility and telecommunications sector funds had the highest proportions of BellSouth and AT&T stock. And once again, where you would find one company, you would find the other. According to Morningstar, the $2 million ProFunds Ultra Telecommunications Inverse (TCIPX) fund held 10.3% of its assets in BellSouth and a whopping 16.9% in AT&T. Next in line was the $296 million Fidelity Select Utilities Growth (FSUTX) fund, which had 9.8% of its holdings in BellSouth and 12.2% in AT&T. Other funds with serious weightings in both telecoms are the $195 million Fidelity Advisor Telecom & Utilities Growth fund (FAUFX) (9.48% of assets in BellSouth, 10.5% AT&T), the $10 million Gartmore Global Utilities fund (7% BellSouth, 6.1% AT&T) (GGUAX) and the $1.05 billion Fidelity Utilities (FIUIX) fund (6.5% BellSouth, 8.5% AT&T).