AT&T-Time Warner Merger judgment opens avenues for big media deals
After a federal judge’s landmark judgment in favor of AT&T’s acquisition of Time Warner on Tuesday, bankers have been drooling over the next mega-deal and the one after that, now that the regulatory floodgates have been opened for mergers and acquisitions.
Shares of Time Warner instantly spiked by 5 percent after the closing bell the moment the news broke, while shares of AT&T fell 1 percent.
Mark Kelly, business professor at Villanova, tells The Wrap that “…a media industry-wide scramble for assets is highly likely. This opens the floodgates. I don’t think some of these other companies can just sit on their hands. They don’t have the luxury of time.”
Evercore ISI analyst Vijay Jayant said a positive trial court decision would be “providing an encouraging backdrop for media M&A.”
Hal Vogel, CEO of Vogel Capital Management and a former entertainment industry analyst, told The Hollywood Reporter, “If the deal is allowed, then a big flurry of M&A in media… will likely be seen."
According to TheWrap, earlier on Tuesday, US District Judge Richard Leon ruled in favor of AT&T and Time Warner, shutting down the US Department of Justice’s argument that the proposed merger will hurt competition and consumers.
The Wrap also writes that the decision is the first real test of antitrust regulation under President Trump, and CFRA analyst Tuna Amobi also expects that because of the “regulatory clarity” stemming from the case, companies across multiple industries will follow the trend of merging and acquisition.
Disney’s plan to acquire 20th Century Fox assets was the most immediate impact of the landmark judgment. “Comcast,” Amobi said, is likely “to be emboldened to make a better offer than Disney for Fox.” BTIG analyst Richard Greenfield said, “Look for a premium to Disney’s bid for Fox of at least 25 percent” and potentially 30 percent, or $65.5 billion to $68 billion.
CBS Corp, Viacom, Lionsgate and maybe even AMC Networks have been mentioned as tentative M&A targets or buyers, though CBS and Viacom might be in limbo for months as they hash out their legal differences.
“Traditional and new media will be emboldened that the coast is clear for a regulatory review and the regulatory M&A environment everyone thought was coming when Trump took office will be on,” said Northlake Capital Management founder Steven Birenberg.
After the closing bell, media-entertainment shares were up all over the place as investors placed bets on which ones would be acquired next. Lionsgate rose 6 percent, while Discovery Communications, AMC Networks, CBS, and Viacom were higher.
But Jefferies analyst John Janedis warned investors in a note ahead of Tuesday’s decision on the Time Warner deal to not expect everyone to be sent multibillion-dollar offers.
“The potential pool transformational M&A deals is rapidly shrinking,” he said. “Standalone CBS is the most attractive asset, though the current issues likely preclude a deal, at least through the summer.”