Shares of telecom giant AT&T (NYSE:T) are falling, down by 5% as of 1 p.m. EDT, after a court ruled in favor of the company in its proposed $85 billion acquisition of Time Warner (NYSE:TWX.DL). The Department of Justice had sued the company in November in an effort to block the deal.
Federal Judge Richard Leon ruled in favor of Ma Bell, saying the DOJ was unable to prove that the deal would hurt competition or necessarily result in higher prices for consumer. Leon noted that the acquisition is a vertical merger, not a horizontal merger, in which case no direct competitor would be eliminated. It's also worth pointing out that a decade ago, antitrust regulators did not seek to block Comcast's very similar acquisition of a majority stake in NBC Universal.
Among other instances, Leon said the government (emphasis original) "failed to show that the merged entity would have any incentive to foreclose rivals' access to HBO-based promotions," as HBO's business depends heavily on third-party distribution.
There has also been considerable speculation that the effort to block the deal was political in nature, as President Trump often criticizes CNN, which is owned by Time Warner.
While the decision is a huge win for AT&T, there are still lingering concerns for investors. Specifically, the combined company will have an utterly massive debt load. Moffett Nathanson analyst Craig Moffett estimates that total debt will be approximately $249 billion -- a quarter of a trillion dollars. AT&T estimates that it will generate $1 billion in annual run rate cost synergies within three years of closing the deal.