The Odds Of The AT&T Time Warner Deal Going Through Are Improving

December 2nd, 2016 by Trefis Team
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The odds of AT&T‘s (NYSE:T) mega-merger with  Time Warner (NYSE:TWX) going through appear to be more favorable, amid positive signals from the incoming U.S. presidential administration and increasing possibility that the deal would be able to avoid FCC oversight. Below we outline some of the recent developments relating to the deal.

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The Financial Times reported that President-elect Donald Trump’s transition team has assured AT&T that the proposed merger will be treated without prejudice, contrary to his campaign rhetoric of blocking the deal, due to increased industry concentration. Moreover, there are some signs that Mr Trump’s views on competition may have changed post-election. For instance, his anti-trust advisers during the transition include a former FTC commissioner and a member of the George W Bush Administration, who both have favorable records on such M&A-related issues. [1]

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The deal could also skip an onerous review by the FCC. Time Warner is likely to offload some broadcast licenses (mostly Radio licenses) and one TV broadcast station, after which it would not be under the jurisdiction of the FCC.  This means that the deal would most likely only require approval from the Department of Justice, which AT&T has been largely optimistic about.

The markets also appear to be more sanguine about the deal’s prospects, with Time Warner’s stock rising by over 8% in the last two weeks.  For instance, the arbitrage spread of the deal – the offer price less the current market price – has contracted from about $21 on October 24 – shortly after the deal was announced – to just about $13.50 in Thursday’s trading. The arbitrage spread as a percentage of the market price has also contracted from about 24% to 12.5%.

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Notes:
  1. Fears ebb of Trump blocking AT&T’s $85bn Time Warner deal, Financial Times, December 2016 [↩]