AT&T, Time Warner Trial Carries Sweeping Implications — ICYMI

We've almost reached the end of the AT&T T-Time Warner ( TWX- Get Report ) saga, as a judge in D.C. is set to rule on the DOJ's suit to block the deal on Tuesday, June 12. While much of the talk has been about how the merger could affect other cable and telecom deals-Fox ( FOXA- Get Report ) , Disney ( DIS- Get Report ) , Sky, Comcast ( CMCSA- Get Report ) , Sprint Sand T-Mobile ( TMUS- Get Report ) are certainly all paying attention-the review of AT&T-Time Warner will also have implications for other mergers.

Executives at CVS Health ( CVS- Get Report ) and Aetna ( AET- Get Report ) and ExpressScripts ( ESRX- Get Report ) and Cigna ( CI- Get Report ) are also eyeing the ruling as it would have big implications for their respective deals, as well. "While the cable landscape is not the same as health insurance and PBMs given the latter is third party pay, the vertical nature of T-TWX still offers insights into the stance of the DOJ under the Trump Administration," writes Leerink Partners' Ana Gupte in a note Monday. "The most likely outcome is that the DOJ will win... and we may see some short covering of CI and CVS, while the spread that AET and ESRX trade at could still narrow." If the DOJ loses its bid to block the AT&T-Time Warner combo, "expect the spreads that ESRX and AET are trading at to narrow meaningfully, and CVS to trade up as this would be a precedent-setting transaction and would point to higher likelihood of deal close." Cigna, the analyst said, is a bit more difficult to decode as investors remain conflicted about the Express Scripts deal.