(Reuters) – Shares of Time Warner Inc fell more than 2% on Wednesday on concerns that US President-elect Donald Trump will make good on his vow to block a proposed $85 billion acquisition by AT&T.
Trump said in October that the telecommunication company’s proposal to buy the owner of HBO, CNN and the Warner Bros film studio was an example of a “power structure” rigged against him and voters.
Time Warner shares were some 24.5% below the implied value of AT&T’s $107.50 per share cash-and-stock offer in early trading on Wednesday, compared to a just under 22% discount at Tuesday’s close, indicating greater investor skepticism that the companies will be able to complete the transaction.
Dealmakers said there will be an immediate slowdown in mergers and acquisitions as companies and advisers seek clues on how Trump’s antitrust enforcement policy will take shape and who he will choose to lead the Justice Department’s antitrust division and the Federal Trade Commission.
“I think a lot of deals will hit the pause button for a bit until we get some clarity on whether President Trump will moderate or be as disruptive as some expect,” said a senior Wall Street banker who asked not to be named because he was not authorized to speak with the media.
“It’s going to be a tough environment for everything until we see how [Trump] behaves as a leader,” the banker added.
The president does not directly decide if a merger is illegal under antitrust law and the job is done by the US Justice Department or Federal Trade Commission, which divide up the work of assessing mergers. If one of the agencies decides to stop a deal, it must convince a judge to agree.
AT&T Chief Financial Officer John Stephens on Wednesday said his company was looking forward to working with Trump and “optimistic” regulators would approve the deal.
“[Trump’s] policies had his discussions about infrastructure investment, economic development, and American innovation all fit right in with AT&T’s goals,” Stephens said at the Wells Fargo technology, media and telecoms conference in New York.
Time Warner’s shares were last down 1% to $86.98, after trading as low as $85.60, while AT&T shares were up 1.2% at $37.44. The Dow and S&P 500 were both higher in early trading.
The election results mean “increased risks” for the AT&T-Time Warner deal, Angelo Zino, analyst at CFRA Research, said.
“At the very least, there are going to be individuals put in place [by a Trump administration] that are going to make the deal a lot more challenging to complete,” he added.
AT&T offered $107.50 per share for Time Warner last month, aiming to acquire content to attract online customers. It has said the Department of Justice will review the deal, which likely faces intense scrutiny since lawmakers are already concerned about cable company Comcast Corp’s $30 billion acquisition of NBCUniversal.
But other investors said it is “too early to say” that Trump will block the deal.
“Candidates say a lot to help them win election, and when reality sets in, you have to see what they do,” said Josh Duitz, portfolio manager at Alpine Funds that owns AT&T shares.
One arbitrage investor who spoke on the condition of anonymity said Trump’s position on the deal was not perceived to be worse than Democratic nominee Hillary Clinton’s or President Barack Obama’s, noting the shares were already trading at levels that suggested a roughly 30% chance of success.
“It was already pricing in a doomsday scenario,” the investor said. “The doomsday is here, but in terms of antitrust, Hillary versus Trump are equal.”
Other big pending US deals also did not see sharp changes in their spreads on Wednesday morning.
The spreads of three pharmaceutical or health care-related deals that have run into antitrust troubles, Aetna-Humana, Anthem-Cigna and Walgreens-Rite Aid, actually narrowed, signaling investors may think they are more likely to close under a Trump administration.
(Reporting by Malathi Nayak and Diane Bartz in Washington, Michael Erman in New York, Aishwarya Venugopal in Bengaluru,; Editing by Soyoung Kim and Meredith Mazzilli)