Time Warner Inc. shares took a nosedive Thursday after the Wall Street Journal reported that the U.S. Dept. of Justice is considering filing a lawsuit to block the content company’s planned merger with AT&T.
Time Warner shares were down more than $6 each (6.2%) to $92.31 per share in early trading Thursday as reports surfaced that the deal, expected to be closed by the end of the year, may encounter a hiccup. The shares closed at $94.70 each, down 3.75% or $3.69 per share.
AT&T announced the deal in October 2016, a $108.7 billion (including assumed debt) pairing that would combine the largest pay TV distributor in the country with the second largest content creator. Time Warner owns the Warner Bros. movie studios and iconic networks like HBO, TBS, Cartoon Network and CNN.
While President Trump had said during his election campaign that he would block the deal, mainly because of what he believed was CNN’s harsh treatment of him, most in the cable business expected the deal to be approved with few or no conditions. AT&T executives have said in the past that because the two companies don’t compete, there is little reason to consider the deal to be anti-competitive.
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“When the DOJ reviews any transaction, it is common and expected for both sides to prepare for all possible scenarios," AT&T said in a statement. "For over 40 years, vertical mergers like this one have always been approved because they benefit consumers without removing any competitors from the market. While we won't comment on our discussions with DOJ, we see no reason in the law or the facts why this transaction should be an exception.”
According to a report in the Journal, DOJ is considering filing a suit in the case that it decides to block the merger. The Journal also said there is another faction within the agency that is working with the companies to approving the deal, but with conditions, but those two sides are not close to a compromise.
The Journal added that it is common in deals of this nature for the DOJ to be working on two separate tracks, and stated that in recent years the agency has placed an emphasis on preparing for litigation in case talks break down.
If the DOJ decided to block the deal, it would have to present its case to a judge and prove that the union would harm competition.
AT&T shares were relatively unscathed in early trading, down 5 cents each (0.2%) to $33.50 each.