AT&T has been told by the US Department of Justice that it needs to sell CNN, Time Warner』s cable news channel, to gain approval for its $84.5bn acquisition of the media company, according to three people with direct knowledge of the negotiations.
The sale of CNN, which President Donald Trump has fiercely criticised as 「fake news」, is just one of the demands being made by the US antitrust authority in order to sign off on the deal, those involved in the talks said. But it could prove a stumbling block.
AT&T is opposed to selling the TV network and is preparing to take the Trump administration to court, arguing the deal with Time Warner does not pose any threat to competition.
「It』s all about CNN,」 said one person with direct knowledge of the talks between the company and the DoJ, adding that the regulator had made clear to AT&T that the deal would go through if it sold CNN.
At the end of last month, the companies said they expected to close the deal by year』s end, but John Stephens, AT&T』s chief financial officer, told a New York conference yesterday 「the closing of the deal is now uncertain」 — though he declined to go into detail about what had changed. Mr Stephens added that a 「vertical merger like this hasn』t been blocked for over 40 years」.
Neither Time Warner nor AT&T would comment on the CNN sale. The justice department did not respond to a request for comment.
Mr Trump has not hidden his opposition to the deal, which had cleared regulatory hurdles in other countries and had been widely expected to be signed off by Washington. During the presidential campaign, Mr Trump had promised to reject the acquisition outright, saying it concentrated too much media control into a single corporate entity.
But Makan Delrahim, the new head
of the justice department』s antitrust division, has been more conciliatory, saying before taking office that he did not believe the merger posed a 「major antitrust problem」.
「The sheer size of it, and the fact that it』s media, I think will get a lot of attention,」 Mr Delrahim told a Canadian TV station last year after the deal was announced. 「However, I don』t see this as a major antitrust problem.」
People with direct knowledge of the antitrust negotiations said Mr Delrahim changed his view after taking office.
The CNN divestiture is one of two demands the DoJ has made, according to another person with knowledge of the discussions. The demands are 「completely unreasonable」 and 「a complete perversion of the guidelines of the law」, the person said.
The deal was originally set to expire last month but last week AT&T extended its termination deadline 「for a short period」 while it waited for approval. At the time the company said it expected the transaction to close by the end of this year.