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AT&T pulls trigger on Time Warner deal; could ITV be next on the bidding block?

Monday, October 24, 2016 3:49
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(Before It's News)

US phone giant AT&T Inc (NYSE:T) could face an uphill struggle persuading the authorities to sanction its bid for media behemoth Time Warner Inc (NYSE:TWX).

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.

If allowed to go through, the merger would catapult AT&T past Walt Disney Co (NYSE:DIS) and Comcast Corporation (NASDAQ:CMCSA) and make it the largest entertainment company in the US.

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.

In the UK, free-to-air broadcaster ITV PLC (LON:ITV) made a run earlier this year at Entertainment One Ltd (LON:ETO), which owns the Peppa Pig franchise and much other media content, but it did not get very far with its £1.03bn proposal, even though it was pitched at a near 20% premium to Entertainment One’s share price prior to news of the approach leaking out.

ITV itself has often been cited as a potential takeover target, with satellite broadcaster Sky PLC (LON:SKY) once building up a 17.9% stake before the government ordered it to reduce it below 7.5%.

Although ITV is predominantly regarded as a broadcaster rather than as a content company, with the rise of satellite TV and streaming services it has made a concerted effort to build up its production arm, ITV Studios, which in 2015 chipped in with £1,237mln in revenue and £206mln in adjusted underlying earnings.

ITV America contributed £320mln in revenue in 2015, up from £235mln in 2014, helped by the popularity of the “Hell’s Kitchen USA” series. Among its creative successes were two US dramas, “Aquarius” and “The Good Witch”, both of which were recommissioned.

In May 2015 it acquired the remaining 75% of Mammoth Screen, one of the UK’s leading scripted production companies, whose successful slate of high end drama includes “Poldark”, “Endeavour” and “Victoria”.

 

Story by ProactiveInvestors

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