BREAKING: Merger Decision Imminent…UPDATE

Posted by Bret on 06/12/18 at 03:30 PM Category: Disney

U.S. District Court Judge Richard Leon will announce the ruling shortly, in the case of the United States against AT&T/Direct TV and Time Warner. The AT&T reached a deal to purchase Time Warner, but the US Justice Department stepped and sued in order to make an antitrust case. It's uncommon for the government to sue to stop a vertical merger. The results will have a huge impact on media and communications companies. Of note, the deal for Disney to buy 21st Century Fox has essentially been on hold, until the ruling in this case.

If the judge rules in that the merger does not violate antitrust laws, it will move forward at lightning speed. But in its wake, Comcast has already announced that it will make a serious counteroffer to buy Fox, in an attempt to outbid Disney. They are waiting to make the offer, pending a positive ruling.

Should the judge rule in favor of the Justice Department, the AT&T deal will collapse, which will have a huge ripple effect across the industry, possibly immediately on the Disney/Fox deal. Comcast might decide to keep their offer silent, or they might have a contingency plan for an alternate type of offer. Disney might actually be more comfortable moving forward, with Comcast out of the picture altogether.

The judge could also rule that AT&T may move forward with the acquisition, but only if the deal is structured differently, requiring AT&T and/or Time Warner to jettison some existing assets to comply with such a compromise.

Stay tuned...

UPDATE 1: Further Pre-Announcement Analysis

For Disney, things have seemingly become more complicated regardless of the outcome of the case. Disney make likely push ahead with their plans, feeling that its deal with Fox is structurally different enough from the AT&T deal so that they could still avoid DOJ intervention, however, it would not be smooth sailing. On the flip side, even if the judge allowed AT&T to move forward, it would then open the door for Comcast to make their counteroffer for Fox, which would force Disney to decide whether to get into a bidding war, or to drop the offer altogether. Comcast also believes that a judges ruling in favor of AT&T coupled with their own counteroffer, would actually cause Disney stock to dip, as investors would be preparing for a possible bidding war. If that happens, Disney's current 100% stock offer of over $50B for Comcast, could weaken considerably...

UPDATE 2: Judge Approves AT&T Purchase of Time Warner...

A federal judge said Tuesday that AT&T's $85.4 billion purchase of Time Warner is legal, clearing the path for a deal that gives the pay-TV provider ownership of cable channels such as HBO and CNN as well as film studio Warner Bros.

The judge did not impose conditions on the merger's approval.

Read about the decision on CNBC HERE.

We can expect an announcement soon from Comcast as they have promised to make a competing offer for 21st Century Fox assets, which could trigger a bidding war if Disney has the stomach for it...