By Carlos Barria / Reuters.
"We are in the stupid season," a long-time Wall Street stock market and takeover banker told me this week. "This is not a question." He could have talked about almost everything: the last White Melt of the White House; the ongoing consequences of the Facebook Cambridge Analytica scandal; or perhaps Donald Trump's market capitalization – a withering expression of "concerns" over Amazon's business model. Instead, the banker referred to a more consistent corporate melodrama: the antitrust lawsuit between the Department of Justice and AT & T at the E. Barrett Prettyman Federal Courthouse in downtown Washington. At stake is not just the pending acquisition of Time Warner by AT & T's $ 85 billion mark, but also the future of M & A, as many see on Wall Street. This is serious, as there is no higher margin business on Wall Street. No capital is required. There are few regulatory concerns. Most importantly, the fees for consulting large mergers can be hundreds of millions of dollars. As much as $ 200 to $ 260 million in the AT & T Time Warner deal, only for merger advice alone, according to an estimate.
What concerns Wall Street Bankers is the novel legal theory behind the government's case against AT & T. For decades, it has been a matter of course that the merger of two competing companies can reduce competition and increase the anger of the Ministry of Justice. This is the reason why AT & T failed in 2011 when it acquired T-Mobile. The concern was that a merger of two major competitors in the wireless telephone business – a so-called "horizontal" merger – would harm consumers because it would reduce competition. However, the Trump administration seems to be arguing against the merger of AT & T and Time Warner that a so-called "vertical merger" between two companies that are not in the same business is also suddenly banned. If both "horizontal" and "vertical" mergers are frowned upon, that will not leave much room for big mergers and acquisitions.
Insiders scoff at the case of the Ministry of Justice, but are worried that the sauce train will run dry. "The day before, we have the same number of distributors as the day after, and the day before there was the same number of content providers as the day after," senior Wall Street banker told me, referring to the defense Christine Varney, Time Warner's lawyer in Cravath, Swaine & Moore. "The concept that AT & T will use its distribution to privilege its own content that needs to be on any other distribution channel in any way is absurd – it's just absurd, but this world is really weird."  He took me through Wall Street's M & A history back to other times, when the government seemed to lose its opinion, using flimsy arguments to block business. He recalled how the government in the time of George W. Bush tried to prevent the acquisition of Unocal by CNOOC with the theory that a large Chinese national oil company could not buy a large American oil company was a threat to national security. "That could have been an interesting argument, except that 100 percent of Unocal's assets were in Indonesia." He also recalled the absurdity of the government's efforts to prevent Shuanghui's acquisition of Smithfield Foods, again out of concern that a Chinese company should not buy one of America's largest pork producers. "Because," he joked, "one could imagine that the interest of national security lies in not allowing the Chinese to buy a pork-producing business." The Obama administration argued that trade should not take place because heparin is the blood thinner made from pork. If the Chinese bought Smithfield, it could affect the supply of heparin, the government argued. There were hearings on Capitol Hill. "The only fact they did not talk about on Capitol Hill at the hearings was that the Chinese already made 100 percent of the heparin in the United States – 100 percent!" He said. "Look, I look back on all this nonsense and I just think politics."
What really puzzles him and other Wall Street bankers regarding the case against AT & T is that the government has not taken a look from Disney's upcoming acquisition of 21st Century Fox. He is incredulous that Trump has called the company founder Rupert Murdoch and congratulated him on a deal that would combine Hollywood's No. 1 Film Studio with one of its major competitors, while at the same time urging its Justice Department to the AT & T -Time Warner Deal Block. "It's so transparently ridiculous," he said.
Another longtime Wall Street banker worries where Trump's interference and illogical thinking will leave the capital markets. It all gets too confusing for C.E.O.s to find out that many of them are paralyzed with inactivity. "He's a guy who hailed the stock market as a testament to his size," he said of Trump. "But these things really start to add up: Regulate Facebook; Go Behind Amazon; Kill AT & T and Time Warner; and any other vertical fusion we know nothing about, but we'll leave Rupert and [Bob] Iger To introduce customs tariffs for steel and aluminum? Just another day in paradise. "
Here he became melancholy and bordered on desperation. "Is the enterprising president doing a lot of extreme business-minded things not for the benefit of the economy or his political party or voters but because of how he feels today?" He asked himself. "What will happen to the stock market when all these things come true? What impact will the economy have and the people who will use all of these tax savings to create new jobs from all the things they do? 'Are they all because he has promised coal miners more jobs and will they bring more jobs to the miners because coal is big?' No, killing AT & T and Time Warner will not help the miners, and the killing of Amazon will be to the miners not help, this stuff adds up, and that's all, because he's like a free radical who just jumps on what he sees. "