The Department of Justice (DoJ) is filing suit to block AT&T Inc. T's purchase of Time Warner Inc TWX.
The Analyst
UBS' John Hodulik.
The Lawsuit
If the DoJ succeeds in blocking the deal, it will be the first vertical merger blocked in decades, Hodulik said. (See Hodulik's track record here.)
The DoJ must prove that combining a content owner with AT&T's distribution would be anti-competitive in an age where traditional TV viewership within the 12-24 demographic has fallen more than 50 percent in approximately seven years, Hodulik said.
The analyst the lawsuit to cast uncertainty on other M&A deals that have been announced or that are circulating in the press. He named the Discovery Communications Inc. DISCA and Scripps Networks Interactive, Inc. SNI merger; the Walt Disney Co DIS and Twenty-First Century Fox Inc FOXA merger; and the Comcast Corporation CMCSA and Twenty-First Century Fox Inc FOXA merger as deals that could be affected by the litigation.
Expectations
The analyst expects the industry to be in a holding pattern until the end of the trial, but he continues to believe that secular shifts are going to drive further M&A activity over the long term. His base case remains that the deal ultimately closes.
The Price Target
Time Warner trades at 13.1 times 2018E PE versus 11 times for the group, Hodulik said. He sees a support for the stock at 12 times 2018E PE, which implies a price of $78. He maintains a $39 price target for AT&T and $108 price target for Time Warner.
Related Links:
This Time Warner Analyst Isn't Concerned By DoJ Challenge Of AT&T Deal
AT&T Resists DOJ Order To Divest Time Warner's CNN For Merger Approval
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
|---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
