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AT&T can complete its massive merger with Time Warner, judge rules


In what could be one of the most consequential antitrust decisions in recent memory, a judge has ruled that AT&T and Time Warner can merge, despite a lawsuit from the Justice Department arguing that the deal would be anti-competitive. While the Justice Department could still appeal, the decision clears the way for a new telecom behemoth, combining AT&Ts paid-TV subscribers with Time Warners content, which includes HBO, CNN, and Warner Bros. The federal judge ruling on the case did not impose any conditions on the deal as part of the decision, handing AT&T a clear victory in the dispute, while delivering a major blow to the Justice Departments antitrust enforcers and telegraphing a green light to other companies with similar merger plans. The ruling, in fact, may have been more closely watched for its effect on future deals. The battle has been seen as a bellwether for other vertical mergers, where a distributor and content producer are looking to combine forces. Now that the AT&T-Time Warner deal has been given a stamp of approval, its all but certain more deals are on the way. Those agreements were lining up even before todays decision: Comcast reportedly planned to make a formal offer to buy 21st Century Fox the day after the ruling, if the judge in the AT&T case approved, an announcement the public can now watch for. The Walt Disney Company is also in the bidding for the company. The AT&T decision is a culmination of intense legal wrangling since the $85 billion takeover announcement in October 2016, and it follows a six-week trial. Early on, questions were raised about whether President Trump, a vocal critic of CNN, was an unseen force in the Justice Departments decision to intervene. But after a decision preventing the AT&T-Time Warner team from digging into the theory, the trial focused on a more traditional question: would the merger harm competition in the marketplace? The Justice Department argued that the major new entrant would be powerful and ubiquitous enough to dictate unfair terms in the marketplace, and it used expert testimony to highlight potential economic perils. AT&T, for its part, has said the merger is necessary for the company to compete against the major tech industry players and would even result in better terms for consumers. Judge Richard Leon did not make it obvious during the trial how he would rule, and any of a number of scenarios were possible. While he might have approved or blocked the deal outright, he also could have made a conditional decision, requiring AT&T to make some sort of concession as a requirement for the merger. Instead, the judge allowed the decision to move through without conditions. Its unclear whether the Justice Department will appeal the decision. In his encyclopedic, 172-page written opinion, Leon rejected the Justice Departments theories of consumer harm, ruling that the agency failed to meet the legal burden showing competition would be substantially lessened by the merger. We are disappointed with the Courts decision today, Assistant Attorney General Makan Delrahim said in a statement. 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 Courts opinion and consider next steps in light of our commitment to preserving competition for the benefit of American consumers. We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the governments lawsuit to block our merger with Time Warner, AT&T General Counsel David McAtee said in a statement. 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. The deadline for the deal is set for later this month, and as part of the judges overwhelming decision against the Justice Department, he wrote that he believed the government would be unlikely to succeed on an appeal, adding that granting a temporary stay of his ruling that scuttled the deal would be unjust.

U.S. judge rules AT&T can acquire Time Warner for $85 billion


( 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.