(June 13): Twenty First Century Fox Inc's shares rose 8% to a record-high on Wednesday, as an approval for AT&T's buyout of Time Warner Inc spurred speculation Comcast Corp would proceed with an offer for most of the media company's assets.
Comcast's proposal, widely expected later in the day, could upend Fox's US$52 billion all-stock deal to be bought by Walt Disney.
A federal judge on Tuesday approved AT&T Inc's US$85 billion buyout of Time Warner, rebuffing an attempt by U.S. President Donald Trump's administration to block the deal and clearing the path for more such deals in a rapidly changing media industry.
Shares of other telecom and media companies such as Sprint Corp, CBS Corp and Discovery Inc were all up between 1.5% and 3% in early trading. Time Warner rose about 4%.
"The decision ... may be interpreted as indicative of the general tone in Washington (and at the DOJ) towards large-scale vertical mergers," Deutsche Bank analysts said in a note to clients.
The move by media companies to consolidate highlights the threat from players such as Netflix Inc and Alphabet Inc's Google, which sell content online directly to consumers, without requiring a pricey cable subscription.
AT&T's stock, however, was down nearly 4 percent, with at least one analyst raising concerns about the debt the company would absorb as part of the deal.
"Time Warner will be a positive for AT&T's income statement, at least initially. But it will be a negative for the balance sheet," said research firm Moffett Nathanson's Craig Moffett, who downgraded the stock to "sell".
"The new AT&T will carry an astounding US$249 billion of debt."
The merger, including debt, would be the fourth largest deal ever attempted in the global telecom, media and entertainment space, according to Thomson Reuters data. It would also be the 12th largest deal in any sector, the data showed.
Cowen and Co analyst Gregory Williams played down the initial stock reaction.
"Once technically driven volatility wears off we expect the stock to move higher as closure will likely provide a new investor catalyst, including about US$1.5 billion in anticipated cost synergies," Williams said.