AT&T ruling boosts stocks of media sector and other mega-merger targets

Tuesday’s court ruling that AT&T Inc. can proceed with its nearly $85 billion acquisition of Time Warner Inc. could open the floodgates to a wave of mega-mergers, and investors wasted no time in betting on the future.

Shares of AT&T T, -4.34% slumped 5% in morning trade Wednesday, putting them on track to snap a six-session win streak, while Time Warner shares TWX, +3.25% jumped 2.8% to head toward a near eight-month high.

The Invesco Dynamic Media exchange-traded fund PBS, +1.40%  climbed 1.4% to a record high.

Read: AT&T wins court approval to buy Time Warner

Tuesday’s ruling will likely give a green light for 21st Century Fox to sell some of its key TV and movie assets. While Fox has agreed to a $52.4 billion all-stock deal with Walt Disney Co., Comcast Corp. is likely to formally submit a rival $60 billion all-cash bid as soon as Wednesday. Fox’s stock FOXA, +7.56% soared 7.6% to a record high, and to pace the S&P 500 index’s SPX, +0.10%  gainers, while Disney’s stock DIS, +2.86% rose 2.5% and Comcast shares CMCSA, -0.33% fell 1.9%.

Comcast was downgraded to market perform from strong buy by Raymond James analyst Frank Louthan, citing the increased risk of a deal overhang, and the threat of a hit to the balance sheet if a deal is completed.

See also: TV, telecom and media companies’ sluggish sales numbers create an urge to merge.

Meanwhile, Sprint Corp. and T-Mobile USA are making their third attempt at a merger, and the path may now be finally clear. Sprint S, +1.79% shares gained 1.1%, while T-Mobile TMUS, +1.48% rose 1.2%.

Sprint was upgraded to outperform from market perform at Raymond James’ Ric Prentiss, to reflect a 65% probability that a merger with is approved.

The ruling could also affect a pair of giant health-care deals. Pharmacy chain CVS Health Corp. is hoping to complete a $69 billion acquisition of health insurer Aetna Inc.by the end of the year. CVS shares CVS, +2.37% rallied 3.0%, while Aetna’s stock AET, +3.69% jumped over 3.8% to a 4 1/2-month high.

And Cigna Corp.’s $67 billion bid for pharmacy-benefit manager Express Scripts Holding Company may also benefit. Shares of Cigna CI, -1.67% slipped 1.4%, while Express Scripts shares ESRX, +3.81% leapt 4.0% higher.

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