AT&T Stays Course Despite U.S. Appeal -- WSJ
July 14 2018 - 2:02AM
Dow Jones News
CEO Randall Stephenson: 'We own Time Warner'
By Drew FitzGerald
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 14, 2018).
AT&T Inc. Chief Executive Randall Stephenson said his
company won't alter its plans for running Time Warner's media
assets despite a Justice Department appeal of the court decision
that allowed the transaction.
"We think the likelihood of this thing being reversed or
overturned is really remote," Mr. Stephenson told CNBC Friday in an
interview at Allen & Co.'s annual Sun Valley, Idaho, media
conference. "The merger is closed. We own Time Warner."
The Justice Department kicked off the appeals process in a
two-page court filing late Thursday, sending the case to the U.S.
Court of Appeals for the D.C. Circuit. U.S. District Court Judge
Richard Leon ruled against the government in June, writing in a
strongly worded 172-page opinion that the department had failed to
prove that the combination of AT&T's television distribution
system and Time Warner's popular cable channels would drive up
pay-TV prices.
The June decision allowed AT&T to close its $81 billion
cash-and-stock takeover of Time Warner's assets, which the company
quickly renamed WarnerMedia. It also sparked a flurry of offers and
deals among other media and telecom companies that continues
today.
Comcast Corp. and Walt Disney Co. are now in a bidding war for
certain 21st Century Fox Inc. assets, a situation that only
developed after AT&T won its case, making Comcast confident its
bid wouldn't face too much antitrust risk.
Judge Leon's opinion focused narrowly on the complaint against
AT&T, though Mr. Stephenson said Friday that the appeals
court's decision could have wider ramifications for other companies
by setting legal precedent in favor of vertical mergers.
"This really could end up solidifying what the law is," he
said.
Personal tensions have simmered between the two sides since the
department filed its lawsuit in November. AT&T lawyers argued
early in the case that political pressure might have influenced
antitrust division chief Makan Delrahim's decision to sue, citing
President Donald Trump's public criticism of Time Warner's CNN.
Judge Leon barred them from seeking more evidence to pursue that
defense and Mr. Delrahim has repeatedly rejected the claim.
Mr. Delrahim, for his part, appeared to bristle at the judge's
unusual comments pressuring the department to allow AT&T to
close the deal. Asked immediately after the loss whether he would
seek a reversal, he said "the Constitution and the statutes allow
for due process."
Under a deal struck last month to allow the transaction to
close, AT&T kept its new media assets, which include HBO and
the Warner Bros. studios, in a separate division walled off from
its wireless and satellite operations. The agreement also required
the company to keep staffing and compensation levels constant for
the time being at its Turner unit, home to channels like Cartoon
Network, TBS and TNT.
The agreement was designed to make it easier to pull apart the
transaction should the government file and win an appeal. It also
means the company isn't likely to change its integration plans
during the appeals process.
Telecom analyst Craig Moffett said the government could argue
that Judge Leon's opinion failed to account for the ways that the
company's media and telecom units' interests are aligned, though
that is no guarantee the Justice Department would win an
appeal.
"One would have to assume that the odds are actually relatively
low. But they are not zero," Mr. Moffett said.
Mr. Stephenson said in the CNBC interview that Mr. Moffett "has
had a lot to say about this transaction; not much of it has been
right so far."
The appeals process will likely take months to wind its way
through court even if Justice Department lawyers seek an expedited
ruling.
AT&T's defense team has included O'Melveny & Myers LLP
litigator Dan Petrocelli and Sidley Austin LLP appellate expert
Peter Keisler. Mr. Keisler, who served as acting attorney general
under President George W. Bush, was a constant presence during the
six-week district-court trial.
The case has already cost the combined media and telecom company
hundreds of millions of dollars, the price for retaining several
law firms and paying off bondholders to cover the delay in closing
the deal. Thursday's appeal means the legal bills will climb even
higher.
"The clock on legal fees has been running and it's been running
on both sides," Mr. Stephenson said Friday. "So it will be a costly
process at the end of the day. It doesn't really matter that much
to us."
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
July 14, 2018 02:47 ET (06:47 GMT)
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