Press reports Comcast is about to pull the plug
Bloomberg reported today that the 14-month saga of Time Warner Cable (TWC) and Comcast (CMCSA) is coming to an end, reportedly as soon as April 24, according to people close to the matter. This deal was always going to be a tough one to get past the regulators, and during the last week, both the FCC (Federal Communications Commission) and the DOJ (U.S. Department of Justice) poured cold water on the deal.
A story out earlier indicated that the DOJ wasn’t even negotiating with the companies over how to remedy their objections. That’s an ominous sign, and the companies rightly took it as a signal the merger wasn’t going to happen.
This deal had politicians against it from day one. Senator Al Franken—a Democrat from Minnesota—was probably the most vocal opponent of the deal and led the charge against the transaction. Comcast was already in hot water with Washington over the way it handled the acquisition of NBC Universal.
This deal was always a long shot, and the only argument the companies had to get past the antitrust regulators was that they didn’t compete directly in each others’ markets. That said, the FCC’s standard was that the deal had to be in the public interest, and the companies obviously couldn’t demonstrate that to the satisfaction of staff lawyers. This one looks like it’s destined for the broken deal file.
If you look at the chart above, you’ll see that the merger spread is more or less at pre-deal levels, so the downside should be pretty much limited at this point. Investors who are interested in picking up some TWC might look to bid for some below the market in the arbitrageur-driven sell-off once the deal is officially over. In short, the merger spread is the difference in price between where a company’s stock is currently trading and what price the potential deal terms would imply. For more details on this, read Merger arbitrage must-knows: A typical stock merger spread.
Merger arbitrage resources
Other important merger spreads include the deal between Baker Hughes (BHI) and Halliburton (HAL) or the merger between Pharmacyclics (PCYC) and AbbVie (ABBV). For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.
Investors who are interested in trading in the tech sector should look at the Sector SPDR Trust SBI Interest (XLK).