Donald Trump’s stance against AT&T’s takeover of Time Warner 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.
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 have predicted as content-creators position themselves for mobile by combining, as Lions Gate Entertainment Corp. and John Malone’s Starz are doing, or teaming up with distributors, like Time Warner is doing with AT&T.
“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.”
The general uncertainty surrounding Trump’s policies following his historic upset of Clinton initially sent financial markets reeling, though S&P 500 Index futures have since pared losses along with European equities. Mexico’s peso led emerging-market currencies lower amid concern U.S. trade policies will become more protectionist.
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.
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 stance under Trump, Campling said.
Investors in Syngenta AG may breathe a sigh of relief that ChemChina’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.
– With assistance from Alice Baghdjian Scott Moritz Todd Shields Gerry Smith and Crayton Harrison