Time Warner (NYSE:TWX)
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6 Months : From May 2018 to Nov 2018
By Drew FitzGerald and Brent Kendall
WASHINGTON -- AT&T Inc. Thursday completed its purchase of Time Warner Inc., hours after the Department of Justice decided not to request a legal delay while antitrust officials consider whether to appeal their court defeat.
The cash and stock deal, worth about $81 billion as of Thursday's close, leaves AT&T with more than $180 billion in net debt and ownership of the legendary Warner Bros. film studio and cable channels like CNN and HBO.
The Time Warner business, which will be housed in a media division soon to get a new name, will be run as planned by longtime AT&T executive John Stankey. AT&T said former Time Warner Chief Executive Jeff Bewkes will stay aboard as senior adviser during a transition period.
On Tuesday, U.S. District Judge Richard Leon denied the Justice Department's attempt to block the deal and said the companies should be allowed to close their transaction before a June 20 deadline, which entitled Time Warner to a $500 million payment if missed.
While the government didn't stand in the way of the deal closing this week, it is reserving its right to appeal and try to break up the joined company later on. A Justice Department official said Thursday the government still hasn't decided whether it will appeal the decision.
Makan Delrahim, the Justice Department's antitrust chief, said in an interview Wednesday evening that the agency was still reviewing the 172-page ruling. "Do I agree with it? No, but if I was faced with the same facts and case and economics would I bring it again? Yes," said Mr. Delrahim, adding that he believes "with every single bone in my body that the transaction would cause harm."
Judge Leon issued a strongly worded opinion Tuesday that took the unusual step of urging the government to let the companies close their deal without further legal interference. He said he hoped the Justice Department would have the "wisdom" not to seek an emergency stay of his ruling in light of the considerable time and expense devoted to the merger review, as well as the commanding win by the companies in his courtroom.
The judge's comments likely would have undermined any DOJ effort to persuade a higher court to put the merger on hold during more legal proceedings.
In a letter to the Justice Department on Thursday, AT&T lead attorney Daniel Petrocelli told the agency that AT&T would keep Time Warner's cable networks, such as CNN and TNT, in a business unit separate from AT&T's communications assets, which include DirecTV.
The lawyer said AT&T would have no role in setting Turner prices and would build a "firewall" between Turner and AT&T to prevent the transfer of any competitive or sensitive information about contract terms or pricing.
Such conditions would make it easier to unwind the combination were the government to win on appeal. Mr. Petrocelli said AT&T would keep the conditions in place until the conclusion of the legal proceedings or Feb. 28, 2019.
Under the terms of the deal, Time Warner investors received 1.4 shares of AT&T common stock and $53.75 in cash for each share of Time Warner. As a result, AT&T issued 1.185 billion shares and paid $42.5 billion in cash.
The Justice Department hadn't lost a merger case in more than a decade, so it hasn't faced a question of appeal in a long time. The DOJ's calculations on whether to appeal could involve a number of considerations: likelihood of success, resources, and the broader importance of the legal issues at stake.
Judge Leon in his ruling Tuesday emphasized that he was relying heavily on the specific facts of the case and not issuing a broad ruling that would threaten the government's ability to bring future cases against vertical mergers that combine complementary companies. Some legal observers, however, have said the ruling is a considerable blow to the government, no matter the judge's statement.
The Federal Trade Commission, which shares antitrust authority with the Justice Department, has faced appeals decisions in merger cases during the Justice Department's long winning streak.
Sometimes the FTC has appealed, and won, including in hospital merger cases. It also won a decade ago when an appeals court said a judge wrongly dismissed the commission's challenge to a grocery store acquisition by Whole Foods Market.
After the ruling, the FTC and the Whole Foods reached a settlement that required the company to sell off some stores but not unwind the entire transaction.
--Sarah Krouse contributed to this article
Write to Drew FitzGerald at firstname.lastname@example.org and Brent Kendall at email@example.com
(END) Dow Jones Newswires
June 14, 2018 21:48 ET (01:48 GMT)
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