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Let the M&A Race Begin

A judge’s approval of AT&T’s bid to buy Time Warner will bring a new wave of consolidation.

Open the floodgates. Judge Leon’s ruling was about as complete a victory as AT&T and Time Warner could have expected. The judge urged the government not to seek to block the ruling, according to Bloomberg and referred to at least part of the Justice Department’s case as “gossamer thin.”

Leon’s rebuke, combined with his ruling, are sure to embolden corporate America as it contemplates a new wave of consolidation. Comcast has all but promised to pursue a deal for 21st Century Fox assets, despite the existing agreement for Walt Disney to buy them.

Fox, no surprise then, was the big winner in after-hours trading, as investors prepped for a bidding war between Disney and Comcast. Fox shares were up 6.9% in after-hours trading Tuesday night, while Disney (-1.9%) and Comcast (-2.8%) were both down.

After almost two years of waiting, investors had a mixed reception for the actual deal at stake. AT&T fell 2.8%, while Time Warner jumped 4.4%.

“We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative,” AT&T General Counsel David McAtee said in a statement after the ruling.

That wording from AT&T suggests the company is still trying to justify the merger, even as it moves very quickly to close the deal. AT&T might have defeated the Justice Department, but its next challenge will be even greater — convincing consumers that a combined AT&T and Time Warner can be an alternative to Netflix, Amazon.com, and the rest of tech. Finding a better way to compete with them is the primary rationale for the merger. It won’t be an easy fight.

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