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AT&T-Time Warner Merger: Insiders Await Judge’s Ruling With Nervous Anticipation After Long Period of Limbo

Long-serving Time Warner employees were euphoric in October 2016 when AT&T clinched its $85.4 billion acquisition agreement with Time Warner. It took 15-plus years, but finally a deal came along that promised to help undo some of the damage done to retirement accounts and personal stock portfolios by the disastrous Time Warner-AOL merger, which was completed in early 2001.

But that excitement turned to anxiety and aggravation during the past year as the completion of the deal became bogged down in the regulatory approval process. The fate of the company that was once an industry leviathan could be settled today by U.S. District Court Judge Richard Leon. Leon is expected to issue his ruling, following a six-week bench trial, around 4 p.m. ET today in his Washington, D.C. courtroom.

Employees who were hoping to see a windfall by the end of 2017 from their Time Warner stock holdings have been in limbo for more than six months. Once the government decided to sue to block the merger on anti-trust grounds, there was no more certainty of mid-level executives reaping rewards from the value of stock options in a buyout. Instead, many have been nervous about their fate amid the transition to a new owner.

In the past few months, a new level of worry has cropped up as whispers have increased that Time Warner may seek to renegotiate the terms of the deal, even if Leon’s verdict goes in favor of AT&T. So much time has passed since the initial deal was struck that Time Warner’s board may have an obligation to push AT&T to raise its offer, in light of the hot M&A market for blue-chip media and content brands. What’s more, Time Warner has delivered strong earnings during the past few quarters, underscoring the value of the company’s core assets: Warner Bros., HBO and Turner. In this climate, Time Warner’s board members could face shareholder backlash if they doesn’t consider what the market will bear for the company in 2018 compared to 2016. This process could also encourage rival bidders to make a run at Time Warner. All of which will drag out the waiting period for Time Warner’s nearly 24,000 employees.

Sources close to the company note that there are clusters of long-serving middle-management executives, particularly at Warner Bros. and HBO, who are waiting for the deal to close before they retire or look to set their last contracts with their operating divisions. These are the people who took the biggest hits when Time Warner shares were tanked by the headaches acquired in the AOL merger. The AT&T acquisition was poised to be a reward for sticking it out with the company. “People can’t believe this has dragged on so long,” said a veteran Warner Bros. executive. The source described the mood among some on the Burbank lot as “waiting for a sign that it’s time to head for the exit, no matter what.”

Sources say there have been noticeable efforts at all Time Warner divisions to tighten the belt on spending and investment in long-term initiatives because of the lack of certainty about where the company will be in a year’s time. For sure, Warner Bros. just committed to a six-year deal with prolific producer Greg Berlanti worth an eye-popping $400 million. And HBO is moving ahead with big plans for extending the “Game of Thrones” franchise. But the general feeling has been that now is not the time to pursue enormous bets on talent or acquisitions. Company insiders noted it’s a tough time for a content company to be in limbo as well-heeled competitors like Netflix and Amazon “spend like there’s no tomorrow,” a source said. Turner’s annual upfront presentation last month in New York was uncharacteristically thin on new programming and development announcements.

As the media world awaits the verdict from Judge Leon on the how-big-is-too-big question, Time Warner employees will be holding their breath and trying to suss out the decision’s impact on their short- and long-term plans. The fact that many legal analysts and observers are predicting a qualified victory for AT&T-Time Warner has done little to calm the nerves of those in the Time Warner trenches.

“On balance and inference, we continue to believe the ruling will come down in favor of the merger, presuming a strenuous burden of proof for the Justice Department to sustain a largely unprecedented anti-trust case. Such an outcome could then open the floodgates for a new wave of M&A activity in a rapidly changing landscape,” wrote CFRA analyst Tuna Amobi in a research note issued Tuesday. “Still, we are mindful of other potential outcomes, including a contrarian verdict that blocks the deal outright, or perhaps a more likely conditional approval that imposes some potential remedies, some but not all of which could also effectively derail the deal.”

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