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Time Warner Shares Plunge: DOJ Considering Suit To Block AT&T Merger

Remember when Donald Trump vowed he would block the mega-merger between AT&T and Time Warner, during his final campaign days? It appears he wasn't kidding: as the WSJ reports, the DOJ is preparing to file an antitrust lawsuit in case it decides to go court to block the Time Warner/AT&T merger. The WSJ notes that while the DOJ and the companies are discussing possible settlement terms that would lead to the deal winning government approval with conditions attached. The two sides, however, aren’t yet close to an agreement, the people said.

Other highlights:

Most outside observers have believed the deal, valued at $85 billion when it was announced last year, was likely headed for government approval. The recent developments aren’t necessarily an indication that the deal is in trouble, but they do suggest more regulatory uncertainty for the companies than many analysts anticipated.

 

“Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market,” an AT&T spokesman said. “While we won’t comment on our discussions with DOJ, we can say that this transaction should be no exception.”

 

AT&T executives have continued to say the deal is on track to close by the end of the year, with financing lined up and all government authorities on board except for the Justice Department.

 

It isn’t uncommon during major government merger investigations for antitrust officials to work on two tracks, one that prepares for litigation and another that works toward a settlement allowing the merger. The antitrust division in recent years has placed renewed emphasis on being ready for a lawsuit in case settlement talks break down.

If the DOJ were to sue to block the deal, that wouldn’t be the end of the matter unless the companies abandoned their plans, the WSJ cautions. The department would have to present its case to a federal judge and prove that the deal would likely harm competition.

In immediate reaction, the stock of Time Warner, parent of CNN, tumbled as much as 6.2%, its biggest intraday drop since February, dropping to the lowest level since December 1.