( Reuters) — AT&T Inc won court approval on Tuesday to buy Time Warner Inc for $85 billion, rebuffing an attempt by U.S. President Donald Trumps administration to block the deal and likely setting off a wave of corporate mergers. The deal, which could close next week, is seen as a turning point for a media industry that has been upended by companies like Netflix and Alphabets Google which produce content and sell it online directly to consumers, without requiring a pricey cable subscription. Cable, satellite and wireless carriers all see buying content companies as a way to add revenue. Trump, a frequent detractor of Time Warners CNN and its coverage, denounced the deal when it was announced in October 2016. U.S. District Judge Richard Leon found little to support the governments arguments that the deal would harm consumers, calling one position gossamer thin and another poppycock. The ruling could also prompt a cascade of pay TV companies buying television and movie makers, with Comcast Corps bid for some Twenty-First Century Fox Inc assets potentially the first out of the gate. The merger, including debt, would be the fourth largest deal ever attempted in the global telecom, media and entertainment space, according to Thomson Reuters data. It would also be the 12th largest deal in any sector, the data showed. In a scathing opinion bit.ly/2Jxx6qE, Leon concluded that the government had failed to show competitive harm and urged the U.S. government not to seek a stay of his ruling pending a potential appeal, saying it would be manifestly unjust to do so and not likely to succeed. Thats a legal shocker, said J.B. Heaton, an attorney and consultant on litigation and regulatory proceedings. I think well see now that companies will be much more confident about vertical mergers, he added, referring to deals where a company merges with a supplier. Shares of AT&T fell about 1.3 percent in after-hours trade following the decision, while Time Warner rose more than 5 percent. Twenty-First Century Fox jumped 7 percent in extended trade after the ruling on expectations that Comcast and Walt Disney Co could start a bidding war to acquire its media assets. Comcast and Walt Disney dropped 4.3 percent and 1.8 percent, respectively. Shares of other media and telecom companies also rose, including T-Mobile US Inc, Sprint Corp, CBS Corp, Dish Network Corp, Discovery Inc and Viacom Inc. This will be a blockbuster summer for media mergers, said Mary Ann Halford, senior adviser to OC&C Strategy Consultants. Shares of Express Scripts Holding Co, which is set to be bought by Cigna Corp for $52 billion, rose 4.8 percent, while shares of health insurer Aetna Inc, due to be acquired by CVS Health Corp for $69 billion, rose 3.6 percent. Opponents of the AT&T decision also predicted more deals. Consumers should fear a cascade of unchecked mergers and acquisitions to further consolidate the telecom industry resulting in less choice, fewer competitors and higher prices, Senator Richard Blumenthal, a Democrat, said in a statement. The Justice Department filed a lawsuit to stop the deal in November 2017, saying that AT&Ts ownership of both DirecTV and Time Warner would give AT&T unfair leverage against rival cable providers that relied on Time Warners content, such as CNN and HBOs Game of Thrones. Leaving the courtroom, Makan Delrahim, head of the Justice departments antitrust division, said that he would read the judges opinion before making a decision on an appeal. The Justice Department is not likely to be put off by the loss, said Amy Ray of the law firm Cadwalader, Wickersham & Taft LLP, noting it had prevailed in stopping other mergers between rivals. Put me on the side of the fence of thinking that AAG (Makan) Delrahim is interested in challenging the next problematic vertical transaction, she said. Cornell law professor George Hay added that the ruling found the governments evidence lacking, rather than a broader determination of how vertical mergers affected competition. AT&T in a six-week trial argued that the purchase of Time Warner would allow it to gain information about viewers needed to target digital advertising, much like Facebook Inc and Google already do. AT&T can use the content from Time Warner to fill its streaming services DirecTV Now and soon-to-be-launched AT&T Watch, which are cheaper online video packages with fewer channels. That could give it a leg up over rival live streaming platforms that do not own content, media analysts have said. AT&T applauded the courts decision and said it expected to close the merger before the June 21 contractual deadline. The government estimated costs to industry rivals, such as Charter Communications Inc, would increase by $580 million a year if AT&T owned Time Warner. Before the trial started, AT&T lawyers said the Time Warner deal may have been singled out for government enforcement but the judge rejected their bid to force the disclosure of White House communications that might have shed light on the matter. The deal cost AT&Ts top lobbyist, Bob Quinn, his job in May after it became public that AT&T had paid Trumps personal lawyer Michael Cohen $600,000 for advice on winning approval. Burns McKinney, a portfolio manager at Allianz Global Investors who owns AT&T, said he would not say the telecoms company had won a huge victory. Its more that they just didnt lose. You always wonder in these cases if theres a winners curse, given the risk (AT&T) cant get the desired synergies and theyre taking on a lot of debt with the merger, he said.
Judge rejects DOJ case against merger, says AT&T can buy Time Warner. AT&T has won a court ruling allowing it to complete its purchase of Time Warner Inc. The ruling (PDF) by US District Judge Richard Leon went entirely in AT&T's favor. The Department of Justice had sued AT&T to block the merger, but the judge's ruling, pending a possible appeal, would let AT&T complete the purchase without spinning off any subsidiaries. The government can appeal the decision, but Judge Leon reportedly said that he would reject any government motion for a stay that would further delay the deal. The case was held in US District Court for the District of Columbia. The government failed to prove that the merger would substantially lessen competition or that AT&T would use its ownership of premium content to harm rival TV providers, Leon wrote. "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," AT&T General Counsel David McAtee said. AT&T said it intends to close the merger by June 20. It's not yet clear whether the government will appeal. " The Justice Department's antitrust chief, Makan Delrahim, said he was disappointed and will consider the government's next steps," Bloomberg reported. As the owner of Time Warner, AT&T would be able to set the price that other cable or satellite companies must pay for a large quantity of TV programming. The Federal Communications Commission under Chairman Ajit Pai allowed AT&T to skip a lengthy public-interest review. But the Department of Justice sued to block the $108 billion merger in November 2017, saying the deal is likely to raise consumers' TV bills. The DOJ argued that buying Time Warner and its stable of popular TV programming would give AT&T too much control over programming and distribution. "AT&T/DirecTV would hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for Time Warner's networks, and it would use its increased power to slow the industry's transition to new and exciting video-distribution models that provide greater choice for consumers," the DOJ said in its complaint. " The proposed merger would result in fewer innovative offerings and higher bills for American families. " AT&T disputed the government's math and tried to prove that President Trump meddled in the government's merger review. Trump had pledged to block the deal when he was campaigning for president. But AT&T failed to provide any evidence suggesting that the DOJ's prosecution of the merger had "discriminatory effect and discriminatory intent," Leon said in a ruling earlier in the trial. AT&T argued that the merger will help customers without harming AT&T's business rivals and that the combined company wouldn't have enough market power to raise antitrust concerns. Customers will benefit from new bundles and offerings made possible by the merger. The combined company, AT&T argued, will "develop new ad-supported video models that shift more costs to advertisers and off consumers. " Consumer advocacy group Public Knowledge was disappointed by today's ruling. "This is a disappointing result, and we expect the government will appeal," Public Knowledge Senior Counsel John Bergmayer said. "In the meantime, not only may consumers be harmed directly by the anticompetitive harms that this merger will cause, such as higher bills and fewer choices of programming and provider, but also by the many other mergers it will encourage." US Sen. Amy Klobuchar (D-Minn.) urged the DOJ to appeal. She said: Allowing this merger to proceed raises serious concerns for consumers and the future of American media, and also sends a troubling signal to others that its open season for vertical mergers that could allow a company to raise the cost of essential products and services that its rivals need to compete, leading to higher costs for consumers and less innovation... I urge the Justice Department to take swift action to appeal this judgment to ensure that competition and consumers are protected.