AT&T Inc is anticipated to win the legal battle with the United States Department of Justice over its $85.4 billion acquisition of Time Warner Inc, according to analysts.
The Justice Department confirmed previous clues after initiating a lawsuit against AT&T, stating that the company would use Time Warner’s content to force rival TV companies to pay “hundreds of millions of dollars more per year for Time Warner’s networks.”
In premarket trading on Tuesday AT&T’s were down 0.5 percent while Time Warner’s shares were untraded.
“We are surprised at the lawsuit as there are decades of clear legal precedent on how these deals are handled,” analysts stated. “We see a 75 percent chance AT&T wins at trial and the onus is on the DOJ to prove potential harm.”
AT&T offered to purchase Time Warner last October for its cable TV channels HBO and CNN, Warner Bros studio, numerous other sought-after assets. AT&T has denied the DOJ mandate to sell DirecTV or Time Warner’s Turner Broadcasting to win antitrust approval.
AT&T’s acquisition of Time Warner is a vertical merger, which is an agreement between two companies that do not compete directly but operate on different steps in a supply chain. “The last time the DOJ challenged a vertical case was in the Carter years; it was last successful under Nixon,” said analyst Jeffrey Kvaal.
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This is Chief Executive Randall Stephenson’s second major case Justice Department after AT&T deserted its $39-billion bid to buy T-Mobile USA back in 2011 due to disapproval from the Obama administration.
This time AT&T appears to be more confident of its case. The company it plans to ask the court for the earliest hearing possible as the current merger agreement will expire on April 22, 2018.
“AT&T made it clear that they are ‘in this to win’ and don’t intend to cut their losses by walking away,” according to Morgan Stanley.