AT&T cleared to buy Time Warner for $85 billion

  • AT&T cleared to buy Time Warner for $85 billion

AT&T cleared to buy Time Warner for $85 billion

AT&T Inc won court approval on Tuesday to buy Time Warner Inc for $85 billion, rebuffing an attempt by U.S. President Donald Trump's administration to block the deal and likely setting off a wave of corporate mergers.

The tie-up would Wednesday largest USA pay-TV operator and the second-largest wireless phone carrier with Time Warner, owner of premium channel HBO, the Warner Bros studios, Cartoon Network and CNN.

U.S. District Judge Richard Leon rejected the government's argument that the AT&T-Time Warner combination would hurt competition in pay TV and cost consumers hundreds of millions of dollars more to stream TV and movies.

In his opinion, Leon said Shapiro's analysis had so many problems the government started backing away from it. He called one of the government's arguments against the deal "gossamer thin".

Leon's ruling could shape the government's future competition policy.

The government's case hinged on an economic model produced by Carl Shapiro, an economist at the University of California at Berkeley, who predicted an annual price increase to consumers of at least $285 million.

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"Justice denied and consumers skewered", Copps said. "There's no constraints", Copps said. "But if Google and Facebook get the signal the court will not let the government block vertical transactions, then the door is open for them buying more artificial intelligence firms, more messaging firms, more data-gathering firms".

Walt Disney seeking to buy major film and television operations of Rupert Murdoch's 21st Century Fox, which would consolidate two big Hollywood studios.

Comcast reportedly held off until the federal court had issued its ruling, but is now expected to bid as much as $60 billion for the Fox assets. A looming example is the pending merger of Sprint and T-Mobile, a $26 billion combination of the country's third and fourth-largest wireless companies.

The AT&T lawsuit is the first time in decades that a government challenge of a "vertical merger" - involving two companies that do not directly compete - has gone to court.

A federal judge has cleared AT&T's planned acquisition of Time Warner, the entertainment company that owns HBO, Turner and Warner Bros. Time Warner, after all, was one-half of one of the worst mergers in history when combined with AOL at the top of the tech bubble. The government failed to prove that the merger would dampen competition and innovation and raise prices for pay TV, said Daniel Petrocelli, the companies' lead attorney in defending the merger. The proposed merger was so big and consequential that it forced federal antitrust lawyers to reconsider legal doctrine that permitted mergers of companies that don't directly compete. He cited the size of the combined companies. "Already, with their cable systems, they control what people see and hear".

In after-market trading following the ruling, shares of Time Warner rose almost 5 percent and AT&T shares fell 1.6 percent.

There was also concern that the federal lawsuit might be politically motivated. The Trump administration sued a year ago, but after months of discovery and a roughly six-week trial, AT&T will now be able to close the deal ahead of the June 21 deadline, which had a "break up fee" of $500 million.

The Trump administration's Justice Department, which opposed the AT&T-Time Warner deal on the grounds that it would lead to fewer choices and higher prices for consumers, will have a tough time trying to stop the frenzy.

"In short, despite the Government's efforts to paint a contrary picture, this is not a case containing direct, probative evidence of anticompetitive intent on the part of high-level executives within the merging company", wrote Judge Leon, an appointee of President George W. Bush.

The Justice Department, which had sued to block the purchase, has the option of appealing the decision.

But both Copps and Radia expressed doubt that the Justice Department will be in a hurry to challenge future mergers.