AT&T Set to Close Merger With Klarman's Time Warner

U.S. District Court Judge Richard Leon announced on Tuesday that AT&T Inc. (NYSE:T) has court approval to complete its $85.4 billion acquisition of Time Warner Inc. (NYSE:TWX), a major holding of Baupost Group manager Seth Klarman (Trades, Portfolio).

AT&T general counsel praises court decision

AT&T first announced the merger on Oct. 22, 2016, a deal that combines Time Warner’s “vast library of content” and ability to create premium content with the Dallas-based telecommunication services company. In a statement, General Counsel David McAtee praised the federal court for giving a “thorough and timely examination of the evidence.” McAtee also said the company expects to close the merger by June 20 to begin giving customers “more affordable, mobile and innovative” entertainment.

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Court ruling opens the door for similar mergers

CNBC columnist Sara Salinas said the court ruling can “spur a wave” of mergers in the entertainment and telecom sectors, including Walt Disney Co.’s (NYSE:DIS) pending merger with Twenty-First Century Fox Inc. (NASDAQ:FOXA)(NASDAQ:FOX). Comcast Corp. (CMCSA) announced on May 23 that it is in advanced stages of preparing an all-cash offer premium to Disney’s.

GuruFocus’ industry overview page for entertainment companies lists Netflix Inc. (NASDAQ:NFLX), Disney and Fox as the largest three companies in terms of market cap. Time Warner comes in fourth with an 11.8% industry weight, as Figure 1 illustrates.

Figure 1

Court ruling affects stock prices for not just AT&T and Time Warner

As of 11:40 a.m., AT&T’s stock price declined 4.31% from its previous close of $34.35 while Time Warner’s climbed 3.18% from its previous close of $96.22.

Fox’s Class A and Class B shares both increased over 7% from the previous close on the court ruling while Disney increased 2.9%.

Disclosure: No positions.