UMG will reject T's bid, at least for awhile. It may be that UMG's shareholders will revolt and tender their shares, but management must stay the course with Comcast.
Why?
Consider, if ATHM is such a valuable property, then UMG must be also, so management should hold out for a higher bid. It's win-win for them and T's low offer suggests another suitor will come in to make a higher bid. I could see the bidding rise to $150 per share since UMG is probably worth $300.
Not too many companies that can make a bid of that size. It's already larger than CMCSA/K. Then there's the issue of management control, post-merger, in a merger of equals. CMCSA/K definitely has the vision; unfortunately, I don't think they have the means to play against T.
Any chance you could possibly substantiate your valuation of UMG--I don't come close even if I place some "decent" public market value on their share of RR. Have you taken into account that RR doesn't have nearly the potential household reach that ATHM has?
The issues are complex and Rtev has tried to touch upon them. Regulatory issues will now surface because the FCC rulings or non-rulings, call them guidelines, carried the sense that excess concentration by one provider would invite review. T does not need to own facilities in order to provide their service. T should elect to avoid such ownership. To seek it implies they wish inordinate control and that control violates the intent of the FCC which now has purview. As long as T has only incidental ownership of facilities so that significant facilities could be owned by other competitors, no intervention by the FCC would occur.
Despite the heavy regulatory involvement in the telecom/cable industry, I generally hate inflicting brain damage upon myself thinking about these issues. I personally do not believe that a 28% market share would trigger a serious review; again, I also think that with the recent acq of TCI, T has proactively already worked out how might the regulatory auth react. Not worried, in fact looking to go long T, even though T is indicated trading -2 on Instinet a few hours ago.
The implications for ATHM are unclear as they have been since Comcast made the silent break. Certainly the shares will rise, but a bidding war could mute any advance and the eventual outcome could be quite negative. There is no point in speculating about these matters since they are immensely complex with many eddies and cross currents. About the only right move available is to own any cable stock, or is it?
I don't see how CMCSA/K has the resources to top T's offer. Not inconceivable, but a stretch--they'd have to give up a lot of control over the resultant, merged company.
Dave Horne keeps telling me that COX is the one to buy. I keep hearing that DSL is gaining on us so I don't want to look backward. If COX jumps in order to strut for tender and DSL makes the intermediate market sing while all the boys are bidding for video dreams, things could slow down a lot down At Home. Then there's always NEM and ABX. You guys like 'Bugs don't you? I like that, 'Bugs@Home.
No view on Cox and not a gold bug either.
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