Legal teams for AT&T Inc. (NYSE: T) and the Department of Justice filed pre-trial briefings ahead of one of the most highly-anticipated antitrust lawsuits in recent memory. UBS analyst John Hodulik says AT&T’s proposed buyout of Time Warner ( TWX) will likely be approved, but both stocks could end up winners regardless of the outcome.
Hodulik says the DOJ’s argument that AT&T could partner with Comcast Corp. ( CMCSA) to keep content out of competitor’s so-called “skinny bundle” offerings doesn’t hold water. In addition, the latest DOJ filing suggests pay TV bills would increase by an average of just 45 cents per month if the deal is approved.
“We also still find it difficult to understand why the DOJ believes pairing Time Warner assets with AT&T would give it any kind of scale advantage in content or distribution given the growth of digital,” Hodulik writes in a note to investors, according to CNBC.
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“While we expect AT&T’s acquisition of Time Warner to be approved, we believe this environment would make Time Warner’s assets highly attractive to other media companies and internet-based competitors were the deal to be blocked.”
If the deal is blocked, it would turn up the heat on the proposed deal between Walt Disney Co. ( DIS) and Twenty-First Century Fox, Inc. ( FOXA). Comcast is another wild card in the equation. If the AT&T deal goes through and AT&T is forced to divest any Time Warner assets, Comcast could be a buyer. Comcast is also reportedly considering a competing bid for the Fox assets Disney is buying.
Uncertainty surrounding the Time Warner buyout has weighed on AT&T stock and kept Time Warner shares trading well below the proposed buyout price of $110 per share.
CFRA analyst Angelo Zino says AT&T is better off closing the deal, but its market value suggests downside is limited either way.
“We think the proposed acquisition of Time Warner could unlock new growth avenues and positions T to meet the growing demand of TV Everywhere,” Zinos says. “We see T’s financial position as healthy, with robust free cash flow, and view the dividend yield of over 5 percent as attractive and safe.”
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UBS has a “buy” rating and $108 price target for Time Warner. CFRA has a “buy” rating and $43 price target for AT&T stock.
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AT&T Inc (T) Stock Has Little Downside Ahead of Antitrust Trial originally appeared on usnews.com
