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The Time Warner Cable–Comcast Merger Has a Scare


Apr. 17 2015, Published 2:29 p.m. ET

The Time Warner Cable–Comcast spread is widening

The Time Warner Cable–Comcast merger spread widened out to $18.32 from its $13.35 close yesterday. The development comes on the heels of a headline saying that staff lawyers at the U.S. Department of Justice are recommending that the Time Warner Cable (TWC) and Comcast (CMCSA) merger be blocked on antitrust grounds. The story didn’t attribute the comments to anyone, just people “familiar with the matter.”

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Antitrust allegations

The antitrust attorneys are apparently against the deal because they’re concerned that consumers will be harmed. The deal has been under a second request for months, and the story suggests that the agency could rule against the merger as soon as next week. The story also says that officials at the U.S. Department of Justice and the Federal Communications Commission aren’t even negotiating with Comcast about ways to mitigate the concerns—either through divestitures, behavioral modifications, or changing practices. This would indicate that the government believes the merger is “unfixable” and should be blocked.

Comcast has responded to the story. “There is no basis for a lawsuit to block the transaction,” said Sena Fitzmaurice, a Comcast spokeswoman. The merger “will result in significant consumer benefits – faster broadband speeds, access to a superior video experience, and more competition in business services resulting in billions of dollars of cost savings.” The U.S. Department of Justice has declined to comment on the story.

For more background on the transaction, check out the original analysis of the transaction, Must-know: Analyzing the Time Warner Cable–Comcast deal.

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).


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