One of the biggest and most important mergers of all time has been approved by Judge Richard Leon in a case that has set a strong precedent. This week’s ruling enables a proposed merger between AT&T and Time Warner, a deal that is worth $85.4 billion. Judge Leon imposed no conditions.
This could lead to mergers between other technology companies and media groups.
After Merger, AT&T Stock was Down, but Opportunity Exists
The telecommunications giant will now control brands such as CNN, HBO, and Warner Bros. Entertainment.
AT&T stocks were down after the approval of the merger. The merger means that AT&T’s debt will increase, as the company bets on being able to use Time Warner’s brands to raise profits and grow subscribership. Investors are not yet convinced, but those that wait this out could profit significantly. Lower prices are also an opportunity for new investors to buy into AT&T.
Before Thursday trading, AT&T (NYSE: T) was down 6.20%, while Time Warner (NYSE: TWX) was up 1.8%.
Good News for Comcast
This is news that investors have been watching closely, as the outcome of this case will impact more than just one merger.
Telecommunications company Comcast, which directly competes with AT&T, has used this landmark court ruling to go ahead with their own offer to obtain Fox assets. Comcast offered $65 billion for Fox on Wednesday, a cash bid which tops what Disney had previously offered for the same assets.
Acquisition will allow for the offering of unique media services (such as TV on demand) through internet packages. This will mean that companies like AT&T and Comcast can compete with industry innovators like Netflix on their own terms using their own infrastructure.
After Comcast (NASDAQ: CMCSA) made their bid official, stock dropped 0.19%. Twenty-First Century Fox Inc. (NASDAQ: FOX) stock went up 7.48%.
Stock Changes Are as Expected
Some shareholders can get spooked when large companies make such significant investments. There’s a lot of risk involved and price drops for Comcast and AT&T were expected. Price growth for Fox and Time Warner was also to be expected.
Short term traders will already be making money from these deals. Long term investors also have the potential to come out on top, particularly if both AT&T and Comcast can capitalize on the advantage of having full control of popular media brands.
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