M&A gates open with judge’s blessing on AT&T Time Warner merger
A federal judge on Tuesday gave a ringing endorsement to AT& T Inc’s planned acquisition of Time Warner Inc without any conditions, opening the door for companies such as Comcast Corp and Verizon Communications Inc to pursue deals to buy creators of media content.
The ruling by Judge Richard Leon of the US District Court for the District of Columbia brings an end to a six-week antitrust trial in which US regulators argued that the US$ 85 billion deal would give AT&T undue leverage against rival cable providers that relied on Time Warner’s content.
The judge’s strong approval, and scathing opinion that urged the government not to seek a stay if they opposed the ruling, will give telecommunications providers the confidence that similar types of acquisitions will also have a shot at clearing regulatory hurdles, and could spur other copycat mergers this year, industry analysts and dealmakers said.
Investors are now also expecting major media consolidation, with Twenty-First Century Fox Inc shares rising more than 6 percent in after-market trading.
Cable network owner Discovery Inc saw shares increase 3.2 per cent while mobile providers, Sprint Corp and T-Mobile US Inc, which are waiting for a government approval of their own, also saw a bump following the decision.
AT& T said that controlling Time Warner’s cable brands will help it craft new types of content to retain its customers as webbased rivals like Netflix Inc woo audiences away from traditional pay-TV subscriptions.
For cable companies feeling the pain of cord- cutting, similar deals for coveted media brands could help them build out new content offerings and offset expected declines in revenues, analysts and dealmakers told Reuters.
The Justice Department had argued that AT& T’s acquisition of Time Warner would allow it to charge premium prices to rivals who relied on its Turner and HBO channels to woo customers to their cable plans, potentially giving it an unfair advantage in the pay-TV market. Now this will be a less of a concern for companies.
“This decision could serve as a ‘green light’ for other potential M& A, including Comcast’s ongoing pursuit of FOX,” said John Hodulik, an analyst at UBS, in a note.
Regulators will still likely scrutinise similar deals, and there is no guarantee that the district court’s approval of AT& T’s merger with Time Warner means that other major media acquisitions would be approved, several antitrust attorneys told Reuters. — Reuters