U.S. federal judge approved of AT&T Inc. (NYSE: T) $85 billion acquisition for Time Warner Inc. (NYSE: TWX), paving itself to the top of the media industry. The deal gives AT&T ownership over multiple widely popular content such as CNN, HBO and Warner Bros.
AT&T shares fell by 3.73 percent, while Time Warner shares rose by 3.9 percent during Tuesday’s premarket hours.
U.S. District Court Judge Richard Leon approved of the acquisition on Tuesday behind closed doors with reports. In the decision, he did not impose any conditions regarding the approval and also urged the government not to seek a stay when issuing his decision, according to CNBC.
AT&T’s operations were predominately surrounded around telecom services, now it places the once communications company into a large competitor in the media industry.
Many analysts and investors expected the merger to be blocked by the Trump administration because it would create a monopoly in the industry. Judge Leon said that the government had little support to show the competitive impact the merger would create.
“We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative.” said David McAtee, AT&T General Counsel.
"We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner. We will closely review the Court's opinion and consider next steps in light of our commitment to preserving competition for the benefit of American consumers," said Assistant Attorney General Makan Delrahim, expressing the Department of Justice’s disapproval.
Comcast Corporation (NASDAQ: CMCSA) announced its plans to offer a “superior” all cash bid for Twenty-First Century Fox Inc. (NASDAQ: FOXA) to top Walt Disney Co.’s (NYSE: DIS) offer if regulators approved of the AT&T deal. Comcast will also plan on acquiring U.K.’s broadcast channel Sky, totaling a bid around $100 billion, according to sources familiar with the matter.
The merger also raises concerns for media giants who have been dominating the sector such as Netflix Inc. (NASDAQ: NFLX) and Alphabet Inc.’s Google (NASDAQ: GOOGL), which could cause more mergers and acquisitions in the industry.
Jefferies analyst told clients that the decision could lead to more mergers because it now changes the view to a "more lenient regulatory environment.”
"M&A activity across the media and telecommunications landscape has largely been in a holding pattern awaiting the outcome of the T/TWX deal," Jefferies analyst John Janedis said Tuesday. "With the deal approved we think it could spur other M&A activity for the group."