Media stocks are mostly higher after AT&T (T) won a
landmark court ruling yesterday afternoon. U.S. District Court Judge Richard
Leon ruled in favor of AT&T, allowing its acquisition of Time Warner (TWX)
to proceed. The ruling was decidedly in AT&T's favor. Unlike when Comcast
acquired NBCU, Judge Leon did not set any conditions on the deal since the DOJ
failed to prove its antitrust case. The deal will close by next week.
Time Warner's stock is trading as a function of AT&T shares because the deal is almost half in T stock. AT&T is down almost 5% as arbitrageurs take hold and a well-respected MoffettNathanson analyst downgraded the stock to Sell this morning given integration risk, weakness in the core business, and a hefty debt load going forward.
So what's next? This afternoon, Comcast (CMCSA) is expected to bid for the 21st Century Fox (FOXA) assets that Disney (DIS) agreed to purchase for $52 bln in stock last December. Comcast is expected to bid in the ~$60 bln range in all or mostly cash and match Disney's concessions in order to limit regulatory risk which is a key concern for Fox's Rupert Murdoch. If Disney’s bid succeeds, its number one movie studio would get even bigger and if Comcast won, this deal would help it gain some international exposure. This sets up a showdown of epic proportions between media moguls Rupert Murdoch, Disney's Bob Iger, and Comcast's Bryan Roberts.
The bidding war for the Fox assets is increasing M&A expectations across the media sector as consolidation in the space tends to come in waves.
Social media such as Facebook (FB) and Twitter (TWTR) and over-the-top (OTT) streaming like Netflix (NFLX) and Amazon (AMZN) have changed the media landscape, which is why Judge Leon balked at the DOJ's assertions about competition. Even Apple is getting in to content creation these days.
Speculation about who's next continues due to the importance of scale to content creators. A telco like Verizon (VZ) could potentially follow in AT&T's footsteps, a cable company like Charter (CHTR) could follow Comcast's lead, or the technology giants could make a move in the space instead of going at it organically by developing their own content.
CBS (CBS) and Viacom (VIAB) are heading to court this Fall over a potential merger that is seemingly being forced by the controlling shareholder for both companies, National Amusements. Their involvement somewhat limits potential upside in CBS, the nation's number one TV network.
Lions Gate (LGF.A) is a niche content creator that has long been rumored to be a target. Lions Gate makes movies and owns the Starz platform.
Discover Communications (DISCA) owns a family of cable networks including the Discover Channel, Animal Planet, and Eurosport. It acquired Scripps Networks, including the Food Network and HGTV earlier this year.
AMC Networks (AMCX) owns its flagship channel among others domestically and internationally.
- OUR VIEW
- LEARNING CENTER