Warner Bros’ M&A horror show has a happy side-plot

For investors, the last installment of the horror series is instructive. AT&T announced an $85 billion deal for Time Warner in 2016. A year later, the Department of Justice sued to stop the acquisition. Though that was a vertical deal, rather than a combination between direct rivals as now, finicky arguments about the price of cable bundles also featured heavily. Time Warner’s stock fell some 18% below AT&T’s offer.

Say an investor bought at that low point and stayed through to the ultimately successful close in June 2018. She would have pocketed a 43% annualized return, handily beating the S&P 500 Index’s 16% rate over the same period.

Despite the difficult legal hurdle for the Golden State’s top attorney Rob Bonta and his peers, the holdup costs Paramount boss David Ellison money and time. WBD shareholders get $0.25 per share, or approximately $650 million, each quarter the transaction doesn’t close past September. Furthermore, veteran WBD executives know by now that prolonged uncertainty can sap morale and momentum. Deep-pocketed rivals like Netflix, which lost a bidding war for the company, as well as Apple and Amazon.com could try to lure restless talent.