AT&T-Time Warner Decision Could Send Waves Across Markets
This article was originally published on ETFTrends.com.
Whether or not AT&T and Time Warner can merge rests in the hands of U.S. District Court Judge Richard Leon on Tuesday, which could send waves across the markets, particularly in the media and telecommunications sector.
“If the deal goes through, it’s going to be a real green light for a lot of vertical mergers in a lot of different sectors,” Emilie Feldman, an associate professor of management at Wharton of the University of Pennsylvania, told Yahoo Finance. “It’s going to have big implications both for media deals and vertical mergers more generally.”
Related: 10 ETFs to Watch as AT&T, Time Warner Trial Begins
Judge Leon’s Impact on Big Mergers
Judge Leon’s decision to approve the merger could pave the way for other companies to perform similar acquisitions. For example, Comcast plans to partake in a bidding war with Disney to purchase Twenty-First Century Fox assets, such as 39 percent of British satellite TV provider Sky Plc and Indian media conglomerate Star.
The AT&T-Time Warner decision will allow for other bidding wars to commence like Comcast’s $60 billion offer and Disney’s $52 billion offer for Fox. CBS and Viacom can move forward with negotiating a merger that its controlling shareholder, National Amusements, would like to see happen.
Verizon, Charter and Discovery are all eyeing content companies to acquire should the AT&T-Time Warner decision get Judge Leon’s approval. Sprint and T-Mobile will look to join forces in a merger since AT&T, a competitor, will have a stronger market presence should it merge with Time Warner.
“It is already the case that district court opinions in merger cases tend to be important precedents, simply because there are so few litigated merger cases,” said Christopher Sagers, an antitrust expert and professor at Cleveland-Marshall College of Law in an email to Yahoo! Finance. “And this of course is a very special case. It’s very, very big, and it’s (I’m pretty sure) the only vertical merger case litigated to the merits in about 50 years.”
Related: AT&T Woos Time Warner, Putting Spotlight on Media ETF
Media ETFs Already Reacting
Judge Leon’s decision will weigh heavily on the markets, particular media-focused ETFs like Invesco Dynamic Media ETF (PBS) , which is currently up 0.66% as of 3:00 pm Eastern Time. Another ETF marked for impact is the iShares Evolved U.S. Media and Entertainment ETF (IEME) , which is currently up 0.21%.
“Everything's on the line now for the Department of Justice,” said Gene Kimmelman, a former DOJ antitrust official who now heads up the consumer advocacy group Public Knowledge. “They either come out as enormous victors … or they’ll face an avalanche of new transactions if they lose this case.”
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