One of the largest mergers in media history may have reached an impasse now that the Justice Department says AT&T Inc. ( T) must sell either sell Turner Broadcasting or DirecTV in order to complete its $85 billion buyout of Time Warner Inc ( TWX).
Time Warner shares tumbled 6.5 percent following a statement from AT&T CEO Randall Stephenson indicating that the company is not planning on parting ways with Turner, which includes popular news outlet CNN. “Throughout this process, I have never offered to sell CNN and have no intention of doing so,” Stephenson says.
The two companies had previously expected the deal to close by the end of 2017.
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The Justice Department’s demands are raising concerns among some onlookers because the merger was widely considered to be vertical in nature. President Donald Trump has been highly critical of CNN’s coverage of his administration, repeatedly calling CNN’s reporting “fake news.”
In a campaign rally in October 2016, then-candidate Trump called the merger an example of media “power structure” that was suppressing his supporters. He called the merger “a deal we will not approve in my administration.”
The Justice Department denies that Trump is involved in the negotiations, according to The New York Times. Justice Department officials say that it was AT&T that offered to divest CNN, but the company strongly denied the statement.
MoffettNathanson analyst Craig Moffett says he would be surprised if AT&T is unwilling to let go of CNN if needed. “What AT&T wanted and still wants out of this deal is the ability to create content bundles with telecom, and that’s fundamentally an entertainment story,” Moffett said on CNBC. “While AT&T and Randall Stephenson have said they’d still like to own the CNN business and they think it’s good business, it’s certainly not a make or break asset for whether or not AT&T would want to continue to do this deal.”
[See: 9 Ways to Invest Under President Donald Trump.]
Barclays Capital analyst Kannan Venkateshwar says the potentially political element of the Justice Department’s demands is atypical of an antitrust review.
“This … would be unprecedented as DOJ’s deal review process has been quite apolitical and based purely on competitive considerations,” Venkateshwar said, according to the LA Times.
Investors have become skeptical of the deal’s completion. Following Wednesday’s sell-off, Time Warner stock is now trading more than 17 percent below AT&T’s proposed buyout price of $107.50 per share.
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AT&T Inc. (T): Is the Trump Administration Retaliating Against CNN? originally appeared on usnews.com
