Twenty-First Century Fox Inc. (FOX) - Get Report shares surged in pre-market trading Wednesday following last night's clearance of the $85 billion merger between AT&T (T) - Get Report and Time Warner T (WX) that is expected to ignite a bidding war for Rupert Murdoch's media empire.
District Judge Richard Leon cleared the merger, without conditions, following a challenge from the U.S. Department of Justice that said the combination would limit consumer choice and stifle competition, which he described as "poppycock" in a scathing opinion published yesterday in Washington. Judge Leon's decision, while an annoyance to President Donald Trump, is certain to be seen as a green light for media mergers as cable and wireless carriers jockey for position in the race to acquire content-creating companies in order to shore-up slumping revenues and challenge new market participants such as Netflix (NFLX) - Get Report and Google (GOOGL) - Get Report .
"According to the government, consumers nationwide will be harmed by increased prices for access to Turner networks, notwithstanding the Government's concession that this vertical merger would result in hundreds of millions of dollars in annual cost savings to AT&T's customers and that no competitor will be eliminated by the merger proposed vertical integration," Judge Leon wrote. "Ultimately, I conclude that the Government has failed to meet its burden to establish that the proposed 'transaction is likely to lessen competition substantially.'"
Fox shares were marked 7.67% higher in pre-market trading, indicating an all-time opening bell high of $43.65 each, a move that would value the entire group at around $80 billion.
The Fox price tag, however, may prove crucial for its two suitors -- Walt Disney Co. (DIS) - Get Report and Comcast Corp. (CMCSA) - Get Report -- both of which have expressed interest in the Murdoch-controlled group's media assets.
Disney, which slipped 1.47% to $102.80 in pre-market trading, offered to buy most of Fox's film, television and pay-television distribution assets for around $52.4 billion -- $66 billion including debt -- late last year, while Comcast said last month it's considering an all-cash bid for the assets that it says will be "at a premium to the value of the current all-share offer from Disney".
Action Alerts Plus holding Comcast shares were marked 3.37% lower at $31.29 as investors bet the new regulatory landscape would give Murdoch comfort in valuing both Disney and Comcast's approaches now that Judge Leon appears to have cleared the sector of any significant consolidation barriers.
Fox shareholders are set to vote on Disney's proposal in July, and were given at least some form of regulatory assurance earlier this month when Department of Justice anti-trust chief Makan Delrahim suggested at TheDeal's Corporate Governance conference that Disney had "good advice and carved out surgically a transaction that might be doable".
Comcast, however, appears to have the inside track in its £22 billion ($29.3 billion) bid for Sky plc, which is 39% owned by Fox, now that Britain's Culture Secretary Matt Hancock has said he was "minded" not to intervene in a Comcast approach for Europe's biggest pay-TV operator.
"Having reviewed the relevant evidence available, I can confirm that I have today written to the parties to inform them that I am minded not to issue an [intervention notice] on the basis that the proposed merger does not raise concerns in relation to public interest considerations which would meet the threshold for intervention," Hancock said in a statement to lawmakers last month.
Comcast has also formally notified the European Commission of its plans to bid for Sky, Britain's biggest pay-TV company, in a deal that could be worth $30 billion if it clears regulatory approval in both Brussels and London.
The Comcast bid for Fox's assets, including the 61% of Sky that is currently on the table, could be worth a collective $60 billion, based on a Reuters report that suggested the Philadelphia, Pa.-based media group is looking at a bridge financing agreement of a similar size.