Yesterday, a federal judge approved AT&T’s (T) purchase of Time Warner (TWX), without conditions, citing insufficient proof of consumer or competitive harm in what was widely considered a vertical merger. Commenting on the news, Credit Suisse analyst Erin Wilson Wright argued that the verdict “bodes well” for pending healthcare mergers, namely Cigna’s (CI) acquisition of Express Scripts (ESRX) and the planned merger of CVS Health (CVS) with Aetna (AET). Meanwhile, her peer at Oppenheimer told investors that Comcast (CMCSA; CMCSK) may soon offer a 25% premium to Disney (DIS) for Fox (FOXA). FAVORABLE FOR HEALTHCARE DEALS: In a research note to investors, Credit Suisse’s Wright said she believes the favorable ruling by U.S. District Judge Richard Leon, approving AT&T and Time Warner’s deal, may pave a path for pending and future M&A across the healthcare supply chain. While the AT&T/Time Warner trial is not directly related to the healthcare universe, the analyst noted that she broadly believes the favorable legal precedent provides an encouraging read-through for the proposed CVS Health/Aetna and Cigna/Express Scripts vertical deals, particularly as both are under Department of Justice scrutiny. Voicing a similar opinion, Deutsche Bank analyst Glen Santangelo told investors in a research note of his own that he continues to believe that CVS Health’s acquisition of Aetna is on track to close in the second half of 2018. Additionally, he believes Cigna’s acquisition of Express Scripts is also likely to close. The analyst pointed out that he expects the favorable Time Warner ruling to further reduce the market spreads in both CVS/Aetna and Cigna/Express Scripts from current levels. 25% PREMIUM?: Discussing what the approval of the AT&T merger may mean for companies in the media sector, Oppenheimer analyst Timothy Horan told investors that he now expects Comcast will offer a 25% premium to Disney for Fox. Disney had announced a $52.4B all-stock deal for Fox’s assets in December. According to a report by The New York Times, Comcast may announce as soon as today a competing bid of just over $60B. The deal is said to include a reverse breakup fee of as high as $2.5B in the event of a block by the regulators, the publication added. Meanwhile, KeyBanc analyst Brandon Nispel told investors that the Time Warner news could drive additional media M&A expectations and also thinks a formal offer by Comcast for Fox can come as soon as today. Nispel argued that 21st Century Fox is the last of the scaled media companies, which makes it appropriate for Comcast to aggressively pursue the company. The analyst highlighted that he does not see Verizon (VZ) as a likely buyer of traditional media assets. PRICE ACTION: In morning trading, shares of AT&T have dropped over 5% to $32.57, while Time Warner’s stock has gained about 3% to $98.88. Disney and 21st Century Fox have gained 2% and 7.5%, respectively. Shares of CVS have advanced about 3%, while Aetna and Express Scripts have each gained almost 4%. Trading lower, Cigna’s stock has slipped about 1.5% and Comcast is down about 2%. OTHERS TO WATCH: Shares of Lionsgate (LGF.A) and Discovery (DISCA) are also on the rise following the federal judge’s decision to clear the way for AT&T’s purchase of Time Warner.
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