AT&T wins court approval for $85bn takeover of Time Warner

Brenda Watkins
June 13, 2018

The combined company would have a library that includes HBO's hit Game of Thrones and channels like CNN, along with vast distribution reach through wireless and satellite television services across the country.

At&T and Time Warner argue they need more scale to compete with online rivals like Netflix and Amazon and with Silicon Valley giants like Google, Facebook and Apple which are expanding in the sector.

The tie-up would Wednesday largest United States pay-TV operator and the second-largest wireless phone carrier with Time Warner, owner of premium channel HBO, the Warner Bros studios, Cartoon Network and CNN.

"The conventional wisdom is that the government had a steep hill to climb bringing the first vertical-merger case", in over 40 years, Eric Mahr, a former director of litigation at the Department of Justice, told Business Insider.

The Justice Department must now decide whether to allow the merger to proceed or appeal the decision to a higher court. "The proposed merger would result in fewer innovative offerings and higher bills for American families".

There have been persistent reports that Comcast, which owns the majority of NBC Universal, would make an offer to Murdoch and Fox's board that included more cash and less stock than Disney was offering.

The ruling is expected to unleash more deal-making.

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The Department of Justice could decide to appeal the verdict. The transition to streaming services, away from traditional cable, is one that's costing pay TV companies millions of subscribers and billions in revenue every year.

Not surprisingly, AT&T said in a statement from General Counsel David McAtee that it was happy with a decision that will allow it to finalize the deal by June 20, one day ahead of its self-imposed deadline.

AT&T-Time Warner is considered a vertical merger, as AT&T is a content distributor and Time Warner is a content creator.

After the ruling, AT&T was down 2.125% and Time Warner was up 4.55% in extended trade.

Announced in October 2016, the deal was quickly denounced by Donald Trump, who as a candidate and later as president has been critical of Time Warner's CNN and its coverage. And in order to stay competitive, AT&T's CEO Randall Stephenson said during the trial that it needed a big deal to survive.

The ruling clears the way for the telecom giant to restart its merger engine, and could prompt a jumbo bond issue sized up to US$18bn, two investors said. It was, Trump said, "a deal we will not approve in my administration". AT&T lawyers initially sought email correspondence between Trump's White House and the Justice Department, but Leon declared that any communications were not relevant to the trial, and AT&T relented.

He took issue with the government's analysis that the merger would result in higher prices for consumers, telling a packed courtroom that the findings "rested on improper notions."‬ And Leon also warned the US government against seeking a stay on the merger if it brings an appeal for the goal of trying to stymie the deal.

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