AT&T/Time-Warner merger fails to excite investors
WASHINGTON — Shares of AT&T Inc. and Time Warner Inc. fell yesterday as investors didn’t appear thrilled by the proposed megamerger announced over the weekend.
In response to the $84.5 billion deal, Moody’s Investor Service said yesterday it had placed AT&T’s credit rating on review for a possible downgrade.
As speculation about the deal swirled Friday, AT&T shares slid 3 percent and Time Warner shares leaped 7.8 percent. In trading yesterday, the stocks closed down 1.7 percent and 3.1 percent, compared with their Friday closing prices.
Moody’s said the deal is expected to face “a rigorous regulatory review” in Washington and that approval could come with “conditions that could limit AT&T’s ability to use Time Warner’s content as a competitive advantage.”
“Regulatory conditions could ultimately undermine AT&T’s objective to differentiate its mobile and pay TV platforms with exclusive content,” the credit rating company said.
Meanwhile, Wall Street banks are writing some of their biggest checks ever to fund the takeover, seeking a bonanza of fees, despite the conc e rn that the $40 billion loan pledge may get caught up in a regulatory impasse.
JPMorgan Chase has pledged $25 billion, with Bank of America providing the rest, sources said. The lending commitment gives the banks an advantage on bond offerings that would find willing buyers among yield-starved investors, analysts say. At the same time the banks face the risk that the deal, along with a chunk of their balance sheets, would be tied up if regulators delay approval.
“This could be an especially lucrative deal for the banking industry; they’re going to make a lot of money if the deal gets done” said Bert Ely of Ely & Co. “The numbers on the credit piece look big, but I’m sure the credit risk will be spread widely.”