AT&T CEO may feel hiring Cohen was ‘big mistake,’ but market doesn’t judge Time Warner deal as any less likely

Reuters

Embarrassing or not, the market doesn’t seem to think the disclosure that AT&T paid President Trump’s personal lawyer makes the Time Warner deal any less likely to close.

AT&T’s CEO Randall Stephenson in a memo on Friday called the decision to pay Michael Cohen $600,000 a “big mistake” and said the company lobbyist who oversaw the decision to hire Cohen has retired.

The disclosure of payments to Cohen by Michael Avenatti, the lawyer for the adult-film personality who alleges a relationship with Trump, from a number of companies has provoked a firestorm.

AT&T has said it paid Cohen to advise it on its pending purchase of Time Warner as well as Federal Communications Commission regulation and corporate tax reform.

What Cohen actually did to advance the cause of the AT&T–Time Warner merger is unclear. CNN reported that he did not contact the Justice Department’s antitrust division, and, about a month before the Cohen contract with AT&T ended, the Justice Department sued to block the deal. Trump himself, before taking office, said “deals like this destroy democracy,” and in office has repeatedly criticized CNN, a unit of Time Warner.

Terms of the AT&T offer are complex. Time Warner shareholders are due to receive $53.75 per share in cash and another $53.75 in AT&T stock. The reality is more complicated: If AT&T shares, at closing, average less than $37.411 in the 15 days before closing, Time Warner shareholders receive 1.437 shares of the telecom operator, and if the average AT&T price over that span is above that level they receive 1.3 shares.

AT&T shares have been south of the $37.411 line for most of the last 3½ months. (As an aside, that level has served as resistance, with the stock unable to close above that price since the middle of March.)

Avenatti’s disclosure that AT&T had paid Cohen didn’t come until after the close of trading Tuesday.

AT&T shares initially declined Wednesday but have gained steam since then, and in midmorning action Friday they were above Tuesday’s closing price — pre–Avenatti disclosure. Based on trading on Friday, Time Warner shareholders would get $46.27 in AT&T stock and another $53.75 in cash, or $100.02 per share.

Time Warner, meanwhile, was trading at $93.04, or a 7% discount to the AT&T bid.

On Tuesday, Time Warner closed at $92.45, compared with the then-$99.30-per-share value of the AT&T bid — still a 7% discount.