U.S. District Court Judge Richard Leon has approved the AT&T-Time Warner merger, giving the $85.4 billion deal the go-ahead over objections from the Justice Department.
The Justice Department’s decision to sue to prevent the AT&T-Time Warner deal was unprecedented, and sent shockwaves through the business community. A populist antitrust agenda was a core part of President Donald Trump’s campaign, and this was the first time it reared its head. It’s generally believed many other companies have held off on mergers and acquisitions, watching this lawsuit with concern. That hasn’t presented some major deals being proposed, though, such as Disney’s bid to purchase the bulk of 21st Century Fox’s film and TV empire.
According to the New York Times, Federal judge Richard Leon has now ruled against the Justice Department, approving the deal. It’s an ideal opportunity for AT&T to grow into whole new markets, gaining valuable programming from Game of Thrones to The Big Bang Theory. Rival companies would have to negotiate licenses with AT&T to air channels like TNT and the Cartoon Network, just as they currently negotiate with Time Warner. What’s more, it’s not hard to imagine a scenario where AT&T offer subscriptions to HBO and news apps alongside wireless services, bundled into a single monthly charge. The company is already preparing to launch a new streaming service, DirecTV Now, and the merger would allow the Warner Bros. archive to become part of that service.
The Justice Department’s decision to intervene in this case was unprecedented. The two companies are in related industries but don’t directly compete, and that kind of merger is usually approved by regulators. Instead, the Justice Department ruled that the two companies sell major parts before getting approval; when both AT&T and Time Warner refused, the issue wound up in court.
The reality is that the industry is changing, and now companies need both the content and the distribution in order to compete. That’s a major driver behind this deal - AT&T has the distribution network, while Time Warner has the content. The same issue is driving Rupert Murdoch’s decision to sell off the bulk of 21st Century Fox’s movie and TV assets. While Fox has the content, they don’t have the network. This decision certainly makes the ultimate Fox purchase more likely, although in the short term things will get pretty complicated. It was recently reported that Comcast was awaiting the outcome of this trial before formalizing their unsolicited bid for the Fox properties.
In the short term, there’s a good chance the Justice Department will choose to appeal. That’s probably been “priced in” by the industry, though, and today’s decision is expected to lead to a wave of mergers and acquisitions regardless of any appeals.
More: New Disney-Fox Merger Details Emerge in Shareholder Letter
Source: New York Times
