Expect the floodgates to open for M&A activity, pursuant to the court approval granted on June 12 to the $85 billion bid by telecom provider AT&T Inc. (T) for cable TV giant Time Warner Inc. (TWX). "The court ruling is significantly important because it will affect the process and pace of broader M&A activity which is also seen as another significant upside catalyst for the market," according to a research report from Ivan Feinseth, chief investment officer (CIO) and director of research at Tigress Financial Partners, as quoted by Barron's. In the wake of the court's decision, the shares of other companies known or rumored to be acquisition targets or merger candidates have jumped, among them, per Barron's:
|Company||Ticker||Line of Business|
|Twenty-First Century Fox Inc.||FOX||Media|
|Sprint Corp.||S||Wireless Telecom|
|T-Mobile US Inc.||TMUS||Wireless Telecom|
|Aetna Inc.||AET||Health Insurance|
|Express Scripts Holding Co.||ESRX||Pharmacy Benefits|
The Battle For Fox
Shares of Twenty-First Fox have surged after the AT&T ruling, as a bidding war appears to be heating up between Comcast Corp. (CMSCA) and The Walt Disney Co. (DIS) for various Fox assets, primarily in cable and satellite television. Comcast is expected to offer $60 billion in cash for these assets, versus an existing $52 billion all-stock bid by Disney, CNBC reports.
More Media Mania
CBS and Viacom have already been engaged in merger talks with each other, but the plot may thicken, with telecom provider Verizon Communications Inc. (VZ) or cable TV company Charter Communication Inc. (CHTR) as possible suitors for either or both, per CNBC as well as a report in The Wall Street Journal. Verizon already is a TV provider through its FiOS fiber optic communications service. More interesting still, CNBC speculates that wireless phone providers Sprint and T-Mobile may look to expand into TV via acquisition once their own plan to merge goes through.
Another player may be cable TV mogul John Malone, the chair and controlling shareholder of Liberty Media Corp. (FWONA). CNBC notes that he also has stakes in Discovery and Charter, among others, and a longstanding belief that smaller TV content providers would benefit from consolidation, possibly also including their combination with cable or wireless companies.
Horizontal vs. Vertical Mergers
Drugstore chain CVS Health Corp. (CVS) already has announced a plan to acquire health insurance company Aetna, while health insurer Cigna Corp. (CI) seeks to buy pharmacy benefit management (PBM) firm Express Scripts (ESRX). Unlike AT&T's bid for Time Warner, which represents a horizontal merger among rivals in the same market, these two healthcare combinations would be vertical mergers of companies in complementary, but different markets, MarketWatch reports. As a result, MarketWatch speculates that these health care deals are even more likely to win approval, given that they do not eliminate direct competition.