The U.S. Justice Department’s appeal of the AT&T-Time Warner Inc. merger could help clarify what corporate combinations are permissible — and it also could discourage Comcast Corp. from making another run at 21st Century Fox.
Analysts on Friday puzzled over why the government would try to unravel AT&T’s purchase of Time Warner after the government suffered a stinging defeat in court — and a full month after the acquisition closed.
AT&T Chief Executive Randall Stephenson, while attending the Allen & Co. Sun Valley Conference in Idaho, was dismissive of the government’s chances on appeal.
“It’s a very narrow path that would have to be traveled to get this thing reversed,” Stephenson said in an interview with business news channel CNBC. “The merger is closed. We own Time Warner.”
Still, Stephenson noted that experts believe a higher court ruling could have significance, particularly in clarifying anti-trust law for vertical mergers. A vertical merger is when a company buys another firm that is not a direct competitor but operates in a different part of the supply chain.
“A lot of legal minds think this could be precedent-setting,” Stephenson said. “This really could end up solidifying what the law is around vertical mergers.”
Some analysts speculated that the government’s planned appeal could stymie Philadelphia-based Comcast, which has been weighing whether to sweeten its offer for Rupert Murdoch’s Fox assets. Fox accepted Disney’s $71.3-billion offer in late June, and has scheduled a July 27 shareholder vote, which gives Comcast less than two weeks to muster a higher offer.
Murdoch has long believed that a deal with Comcast would face a stiffer regulatory review than a sale to Disney. The Justice Department also has said it would approve a Disney-Fox deal as long as Disney sells Fox’s 22 regional sports networks.
But the government still seems determined to try to overturn the AT&T/Time Warner merger, suggesting that it may also go after Comcast-Fox, which also is considered a vertical merger.
AT&T prevailed over the Justice Department following a six-week trial that unfolded in a Washington, D.C., courtroom. Judge Richard Leon tried to discourage the government from mounting an appeal.
“Judge Leon was very clear in his ruling that he believed the government did not meet its burden of proof in the case, and discouraged the DOJ from asking for a stay,” media analyst John Janedis, with the brokerage firm Jefferies & Co., wrote Friday in a research note.
“He also suggested the government would not succeed in the case of an appeal,” Janedis said. “We believe it could take a year or more before a final decision is made.”
On Friday, AT&T slipped 1.7%, or 56 cents, to $31.67. Comcast closed up less than a percent, or 15 cents, to $34.70.