AT&T, the third largest cable television operator in the US, pulled the trigger over the weekend on its rumoured bid for Time Warner, offering US$85bn in a mixture of shares and cash for the CNN and HBO owner.
Its potentially dominant market position, however, is likely to attract the interest of politicians. Presidential candidate Donald Trump has already said he would block the merger, should he be elected, though technically he would not be in a position to do so, as authority rests with the US Department of Justice.
Brian Fallon, a spokesman for the Democratic presidential candidate Hillary Clinton, told reporters on Sunday there were “a number of questions and concerns” about the deal, but implied that Clinton would wait for more details on the deal to emerge before taking a stance.
A Senate anti-trust sub-committee is set to review the ramifications of the deal next month.
Nevertheless, AT&T’s chief executive, Randall Stephenson, is confident regulators will give the merger the green light, albeit after forcing the company to make a number of concessions.
The Associated Press reported Stephenson as saying there is “no competitive harm that is being rendered by putting these two companies together, so any concerns by the regulators, we believe, will be adequately addressed by conditions.”
Shares in Time Warner surged 7.8% to US$89.48 on Friday as rumours of the bid circulated, and were up 0.6% at US$90 in pre-market trading on Monday morning. AT&T is offering US$107.50 a share, half of which is in cash, for Time Warner and the fact that the shares are trading well below that level probably indicates a significant element of doubt over whether the regulators will wave through what would be the biggest merger to take place this year.
The industry has seen a wave of consolidation in the US this year, with Charter Communications Inc (NASDAQ:CHTR) taking over Time Warner Cable, which, as the name suggests, was once part of Time Warner Inc, while NBCUniversal Media snaffled up animation studio Dreamworks.
Meanwhile, it appears as if Stephenson is not waiting around to take the fight to AT&T’s broadcast rivals, judging by this tweet.
AT&T CEO says over-the-top TV product “Directv Now” will launch next month, will be priced “radically lower” than other similar prodcuts
— CNBC (@CNBC) October 24, 2016
Story by ProactiveInvestors