Trump’s AT&T Rhetoric Casts Shadow Over Future Blockbuster Dealsby , , and
President-elect has called combination ‘poison’ for democracy
Trump’s protectionism could also bode ill for deal-making
Donald Trump’s stance against AT&T Inc.’s takeover of Time Warner Inc. may herald a broader intervention in mega-mergers under the next U.S. administration.
Trump, who defeated Hillary Clinton in Tuesday’s presidential election, has vowed to block the $85.4 billion transaction -- the largest deal announced globally this year -- calling it “poison” to democracy.
“As an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN -- a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few,” Trump said in an Oct. 22 speech in Gettysburg, Pennsylvania -- the same day the deal was announced.
AT&T shares closed 1.2 percent higher Wednesday at $37.44, while Time Warner fell 1.5 percent to $86.60 in New York. That sent the spread on the deal -- the difference between the offer price and the target’s current trading -- to the widest gap since the transaction was announced, according to data compiled by Bloomberg.
On the campaign trail, Trump took aim at the media, repeatedly calling the election “rigged” and singling out major outlets like the New York Times and Time Warner’s CNN. He said he would push for a breakup of NBCUniversal and Comcast Corp., which merged in 2013.
That stance casts a cloud over a potential round of media mergers that analysts are predicting. Content creators are positioning themselves for mobile by combining -- as Lions Gate Entertainment Corp. and John Malone’s Starz are doing -- or by teaming up with distributors, like Time Warner is doing with AT&T.
See also: A list of pending takeovers of U.S. firms by non-U.S. buyers
“A Trump administration will be a wildcard for antitrust enforcement,” said Gene Kimmelman, president of the Washington-based policy group Public Knowledge and a former U.S. antitrust official. “Trump certainly railed against consolidation during the campaign, but we don’t know what kind of enforcers he’ll select to steer competition policy.”
While it’s unclear whether a Trump administration would oppose M&A more broadly, he has given some signals: He’s excoriated free-trade pacts, saying they sent jobs to China and Mexico, and pledged to increase the repatriation of cash held by U.S. companies overseas at a much lower tax rate, making acquisitions by American companies abroad less attractive.
In a survey by Intralinks Holdings Inc. before the election, 56 percent of global deal-making executives said a President Trump would be bad for M&A -- though only 15 percent foresaw him winning.
“Much will depend on the extent to which President-elect Trump’s campaign positioning translates to policy,” said Mike Flockhart, a corporate partner at law firm Herbert Smith Freehills in London. “But if the U.S. moves in a more protectionist direction, we could see an impact on cross-border deal activity.”
While the general uncertainty surrounding Trump’s policies following his historic upset of Clinton initially sent financial markets reeling, U.S. stocks and the dollar closed higher amid speculation Trump and a Republican-controlled Congress will pursue business-friendly policies.
Still, Jean-Francois Comte, co-founder of Lutetia Capital, whose investment strategies include merger arbitrage, said he didn’t expect the Trump administration to block the AT&T-Time Warner deal, despite the rhetoric. The outcome of the election could even be a positive for pending combinations of U.S. health insurers, which faced criticism from Clinton, he said.
“There might be some stress short term because of these statements, but let the dust settle,” Comte said.
AT&T looks forward to working with Trump when he becomes president and remains optimistic about the Time Warner deal, Chief Financial Officer John Stephens said Wednesday at an investor conference. Time Warner declined to comment.
Other big pending deals include Dow Chemical Co.’s $59 billion merger with DuPont Co., Bayer AG’s combination with Monsanto Co., and the two health insurance megadeals -- Anthem Inc.’s bid for Cigna Corp. and Aetna Inc.’s offer for Humana Inc.
Shares in Aetna and Humana, both of which have scaled back their Obamacare coverage offerings in recent months, climbed Wednesday.
Overall, Comte said he didn’t expect a negative impact on M&A. In fact, the prospect of the White House and Congress under Republican control creates greater certainty, and “historically, Republicans have not been bad for M&A,” he said.
Not everyone is so sanguine. Neil Campling, an analyst at Northern Trust Securities LLP in London, said Qualcomm Inc.’s $47-billion purchase of Eindhoven, Netherlands-based NXP Semiconductors NV, announced last month, could be at risk under Trump.
There’s also been a wave of Chinese investors buying U.S. technology companies in recent years and that could slow if the Committee on Foreign Investment in the United States takes a tougher view under Trump, Campling said.
The committee, whose chairman is the Treasury Secretary, is made up of senior officials from Homeland Security and other government departments. This year it’s blocked or sought changes to a number of high-profile Chinese deals, including the purchases of Royal Philips NV’s Lumileds lighting-components business and printer maker Lexmark International Inc.
“It’s one of the tools that Trump has that is perhaps less blunt than all-out tariffs. It’s one of the things that could change within a relatively short timetable,” said Annabella Fu van Bijnen, a partner at Linklaters LLP in Hong Kong. “How would they do it is an open question. Is it a broadening of their mandate, or is it a tougher stance?”
Investors in Syngenta AG may breathe a sigh of relief that China National Chemical Corp.’s $43 billion takeover of the Swiss pesticides maker has already been cleared by the committee. The probe by U.S. national security officials had been considered a potential stumbling block for the deal, which is still subject to antitrust review by regulators in a number of countries.
While Syngenta shares may fall in the short term should the U.S. dollar -- the currency in which the ChemChina offer is priced -- come under pressure, Trump’s victory is unlikely to derail the takeover, according to Zuercher Kantonalbank analyst Philipp Gamper.
“The Syngenta-ChemChina deal is basically over the line,” Gamper said by telephone.