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An unlikely winner from the AT&T-Time Warner decision — CVS Health

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Shares of drugstore CVS Health jumped Wednesday, a day after a federal judge decided to permit ATT’s bid for Time Warner in what many on Wall Street are considering a tacit go-ahead for other so-called vertical mergers.

The ruling may clear potential roadblocks ahead of the $69 billion tie-up between CVS and health insurer Aetna, a deal confirmed by the companies in late 2017. Shares of CVS and Aetna both jumped 3 percent on Wednesday.

Though the outcome in the six-week ATT trial will undoubtedly encourage a wave of deal-making in the media and telecommunications industries, it will also likely facilitate future vertical mergers, whereby one company mergers with another in its supply chain.

Health-care stocks lead market at the open

“U.S. District Court Judge Richard Leon ruled that ATT’s acquisition of Time Warner is legal and did not impose conditions on the merger’s approval, which we think bodes well for CVS’ pending acquisition of Aetna,” Cowen’s Charles Rhyee said in a note.

The Department of Justice sued to block the media deal, claiming that ATT, owner of satellite television provider DirecTV, could abuse its market share by charging rival distributors more for Time Warner content and thereby harm consumers.

“Given the favorable ruling of the ATT/Time Warner merger, we expect shares of CVS to trade up tomorrow, as well as shares of ESRX [Express Scripts] which is being acquired by CI [Cigna],” the Cowen analyst said in the note Tuesday.

CVS Health expects the deal to close in the second half of 2018.

Tom Franck


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