Time Warner’s Floor? We May Be Standing on It

Time Warner’s Floor? We May Be Standing on It

By Tara Lachapelle

For any Time Warner investor — but especially merger arbitrageurs whose bets hinge on the company’s deal with AT&T succeeding — this is one ugly chart. Shares of the TV-network operator are trading almost as if there is no deal.

Winter is Here
When AT&T announced it was buying HBO’s parent Time Warner last October, its cash-and-stock offer was worth $107.50 a share.

The US Justice Department is expected to sue to block the transaction soon, potentially even as early as Wednesday, after regulators reportedly asked for concessions that the companies consider to be deal-breakers. They included selling either AT&T’s DirecTV business or Time Warner’s Turner Broadcasting division, which houses networks such as CNN and TBS.This merger hasn’t turned out the way most expected. The prevailing thought had been that it could win regulatory approval in the fall and close by year-end, a deadline AT&T CEO Randall Stephenson reiterated. Now it’s looking like the companies are headed for a showdown in court that could take months, shrinking returns for merger arbitrageurs and leaving the future of several businesses and some 25,000 Time Warner employees up in the air.

While I do think AT&T stands a good shot in court and that the odds of the deal are better than the market is currently implying, now seems like the right time to think about what these companies and their stocks look like in the absence of their merger.

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