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AT&T-Time Warner Deal Could Unleash M&A

The long-awaited legal green light for the $US85 billion takeover by AT&T of Time Warner has finally arrived and subject to any appeal, America could now be in for an orgy of multi-billion dollar bids and deals.

The judgement for the merger overnight Tuesday has cleared the way for a multi-billion dollar orgy of deals in the US across the economy with attention first up focusing on the battle for assets from the Murdoch family’s 21st Century Fox.

The decision to allow US telco AT&T to buy Time Warner was also a slap in the face for President Trump and his administration which sued to block the deal. That has now failed.

US analysts however point out that a series of other massive deals will be impacted by this ruling.

Other companies with large deals in the making - such as the $US69 billion bid from CVS, the drug store chain and healthcare group for healthcare insurer, Aetna and T-Mobil’s $US146 billion proposed merger with Sprint - will now look to the AT&T case to support their cases with regulators.

US District Judge Richard Leon’s decision clears AT&T to directly (it already controls satellite group, DirecTV) enter the US and global media business via brands such as CNN, HBO, TNT and TBS.

Time Warner is a major program supplier to commercial TV in Australia with all three networks taking product, especially Nine, while the cable channels and their content are major assets for Foxtel and its entertainment business, as well as Fox Sports.

The ruling is a blow to Makan Delrahim, the justice department’s antitrust chief, whose attempt to stop the deal was portrayed as being politically motivated. President Donald Trump had promised to block the transaction as a candidate in the 2016 elections (though Delrahim had said in 2016 that he did not see a problem with the deal, but changed his tune when Trump appointed him to his current post). The political motivation, if any, of the blocking of the deal was ruled out of the trial by Judge Leon.

In May after the trial had ended it emerged that in 2016 AT&T had paid the president’s personal attorney, Michael Cohen, for advice on the deal. That now seems to have been a waste of time and effort and an embarrassment for AT&T.

Before any takeover bonanza happens, we have to see if the Justice Department will appeal the verdict. 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.

But if that doesn’t happen then Comcast will reveal its expected $US60 billion cash offer for the assets of 21st Century Fox that the Murdoch family has agreed to sell to Disney for $US52.4 billion in Disney shares.

Comcast already has a $US31 billion offer on the table for all of Sky Plc in the UK, which Fox wants to buy (it already owns 39%) in a deal valued at around $US27 billion (with Disney helping).

But because of tax problems, the Murdochs want Fox shares for the assets, not cash from Comcast. At least one big hedge fund is a player in Fox - TCI, the KK fund with a reported 7% stake in the voting shares in Fox. It has urged Fox’s board (dominated by the Murdochs) to take any higher cash offer. That will be unlikely.

The Murdoch Family Trust will become the largest single shareholder in Disney in that deal.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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