Despite Monday’s news, investors on Tuesday seem to be playing it cool and shrugging off the Justice Department’s lawsuit to block the prospective AT&T-Time Warner deal.
In early trading, AT&T’s (NYSE:$T) stock was down marginally, while Time Warner (NYSE:$TWX) shares were up roughly 1%.
AT&T has been trying to purchase Time Warner for quite some time, with the deal valued at $85 billion, which makes it one of the largest-ever media mergers in the United States. However, on Monday, the Department of Justice announced that it had gone to court to block the deal. Why? The Department argued that the acquisition would hurt consumers as it would lead to higher costs for TV services.
“If this goes to court, we see AT&T prevailing,” analyst Paul Gallant of Cowen & Co. said on Tuesday. “DOJ always bears the burden in court. But here we believe it will face a higher-than-normal burden because it needs to explain its departure from longstanding clearance of vertical transaction.”
When the public was made aware that the Justice Department filed a suit to block the deal, it spread like wildfire across social media, which is why it is so surprising that both companies stocks seem relatively unaffected today. The Justice Department has not challenged a vertical merger – which is what people call the proposed AT&T-Time Warner merger – since 1979, which is when Jimmy Carter was still in the White House.
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