[A2k] FT: Judge clears way for $80bn AT&T bid for Time Warner

Thiru Balasubramaniam thiru at keionline.org
Wed Jun 13 00:05:27 PDT 2018


Judge clears way for $80bn AT&T bid for Time Warner
Court sides with two corporate giants in landmark antitrust litigation

Kadhim Shubber in Washington and Eric Platt in New York

AT&T won the green light for its $80bn takeover of Time Warner on Tuesday
after a federal judge in Washington rejected the US government’s argument
that it would harm competition, paving the way for a blockbuster
transaction that could reshape the US media sector.

Judge Richard Leon sided with the two corporate giants in what was the
government’s first big antitrust litigation against a vertical merger in
decades. He allowed the proposed deal to go ahead without any conditions,
sending shares of Time Warner higher.

The ruling is a blow to Makan Delrahim, the justice department’s antitrust
chief, whose attempt to stop the deal was cast by AT&T as being politically
motivated. President Donald Trump had promised to block the transaction as
a candidate in the 2016 elections.

Judge Leon had excluded the political argument from the case, but still
came out comprehensively in the companies’ favour.

He rejected the government’s arguments that AT&T would harm consumers, such
as by threatening to exclude Time Warner content from rival distributors
and driving up prices.

“If there ever were an antitrust case where the parties had a dramatically
different assessment of the current state of the relevant market and a
fundamentally different vision of its future development, this is the one,”
the judge said.

He noted that Time Warner’s Turner division, which includes the TBS, TNT
and CNN channels, had never turned to long-term blackouts of its networks
when negotiating with distributors. And he rejected the government’s
suggestion that AT&T would prevent rival distributors from using Time
Warner content in marketing materials.

“At the risk of stating the obvious, this is a gossamer-thin claim,” he

Judge Leon also said it would be “manifestly unjust” for the government to
seek a stay in the case, which could prevent his order from taking effect
by a deal deadline of June 21.

The decision is a win for Randall Stephenson, AT&T chief executive, and
Jeffrey Bewkes, his Time Warner counterpart, who argued that the tie-up
between their two companies was necessary to compete with the likes of
Google and Netflix.

While the two companies have sought to tie up the deal over the past two
years, the media industry has changed rapidly. New entrants have ploughed
cash into original content and entertainment companies have embarked on a
wave of consolidation.

After the ruling, on the court steps, the companies’ lawyer Daniel
Petrocelli told reporters the decision “was a sound and proper rejection of
all of the government’s arguments to stop this merger”.

Mr Delrahim said the Department of Justice would “closely review” the
opinion and consider appealing against the decision. A December court order
precludes AT&T and Time Warner from completing the transaction until June
18. The merger agreement is set to expire on June 21 and the justice
department could ask for an injunction while an appeal is heard.

“We are disappointed with the court’s decision today,” Mr Delrahim said.
“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

Shares of Time Warner surged in after-hours trading, climbing 4 per cent to
more than $100, while AT&T was 2 per cent lower at $33.50. AT&T said it
planned to complete the merger on or before June 20.

“We are pleased that, after conducting a full and fair trial on the merits,
the court has categorically rejected the government’s lawsuit to block our
merger with Time Warner,” said David McAtee, AT&T general counsel. Its
lawyer Dan Petrocelli told reporters the government could present “no
credible proof in support of any of its theories”.

The court ruling may spur other vertical mergers, where businesses in
different parts of the supply chain combine. In particular, it was expected
to give Comcast the confidence to gatecrash Walt Disney’s $66bn bid to buy
assets from Twenty-First Century Fox.

Dealmakers and senior executives across corporate America had awaited the
decision, warning that a loss for AT&T could chill merger and acquisition

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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