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Investors don’t seem too convinced the AT&T-Time Warner mega-merger is going to go through, based on early market reaction.
Time Warner, which agreed to an acquisition by AT&T for $107.50 per share, is trading at only $87.91 per share as of 10:36 a.m. ET. Sure, the stock rose in the days before the deal was announced, but it’s still way below the offer price.
Traders could reap a 22% gain if they buy Time Warner stock now and the deal closes at that price. Typically, when an acquisition is announced, the share price jumps and trades much closer to the deal price.
People have been asking about the regulatory hurdles that AT&T and Time Warner will have to overcome since soon after Saturday’s announcement.
Already, politicians are coming out against the deal with both presidential nominees Donald Trump and Hillary Clinton expressing skepticism about the potential deal along with Democratic Vice Presidential nominee Tim Kaine, and Senators Bernie Sanders and Al Franken.
It’s worth noting that the Department of Justice has been quicker than usual to block large mergers in the past year, most notably Halliburton-Baker Hughes, Anthem-Cigna, Aetna-Humana, and Staples-Office Depot.
AT&T and Time Warner’s response has been that the integration of the two companies does not hinder competition since the two firms compete in different areas – Time Warner creates content while AT&T delivers it. AT&T CEO Randall Stephenson defended the deal in an interview on CNBC.
“It’s a big merger, but it’s vertical integration and think about the area’s that have been really contentious over the last few years in our industry and in [Time Warner CEO] Jeff [Bewkes] industry, they have been horizontal mergers where the government was concerned about a competitor being taken out of the marketplace,” said Stephenson. “This has none of that.”
Stephenson and Bewkes have also reiterated this point in other media appearances since the deal was announced.
So far, it does not seem like investors are buying into the deal actually going through. Bloomberg calculates a deal probability, and right now puts the odds of this one closing at just 25%. Here’s Time Warner’s stock price over Monday morning:
- Markets Insider