Media mergers ahoy as DoJ drops plans to appeal AT&T deal

The US Department of Justice has backed down over the mega merger between AT&T and Time Warner, which could set in train a raft of further giant deals.

After being unable to prove the deal could harm rivals, the US government decided against delaying the deal after a federal judge had approved the $85bn deal without conditions on Tuesday.

With telecoms titan AT&T taking over media giant Time Warner, owner of CNN and HBO cable network and the Warner Brothers film studio, the deal is a so-called 'vertical merger' in the mode of Amazon’s purchase of Whole Foods and drugstore chain CVS’s purchase of health insurer Aetna.

Analysts have suggested that the deal will spark more content distribution companies looking to acquire content production businesses. Jamie Dinan, the founder of York Capital Management, told CNBC the gates were now "wide open for more deals", saying many transactions had been either on hold or up in the air pending the outcome of the AT&T verdict.

Indeed, Tuesday's ruling has already provoked more movement in the sector, with AT&T's rival Comcast launching a $65bn bid to challenge Disney's bid for the entertainment assets of 21st Century Fox.

The DoJ wanted to block the AT&T deal as it felt it would lead to fewer choices for consumers. President Donald Trump was openly against the takeover, deeming it “not a good deal”.

But overnight a filing submitted to the court by the DoJ chose not to take up its option to seek a stay for the deal, with lawyers from both sides of the case, representing the government and the two companies, asking the court to allow the deal to close, pending a possible appeal.

The US government said it was still evaluating an appeal, for which it has 60 days from Tuesday's verdict.