Judge Richard Leon’s powerful approval of the AT&T-Time Warner deal is the satisfying resolution of a story we don’t see often enough. Two excellent CEOs decided to do something that was smart for both their companies. When the Justice Department tried to block the deal, they made the risky, high-stakes decision to fight back in the antitrust trial of the decade. Now it appears the deal will happen.
But wait—this is how things are supposed to work. So why is that unusual? Here’s why.
Time Warner CEO Jeff Bewkes was willing to sell his company at a good price and then leave when the deal closes. Way too many CEOs instinctively fight takeover bids, seeing them falsely as battles that one side will win and the other lose. But Bewkes, since becoming chief in 2008, has been that rare CEO who deeply understands corporate finance and who sees his role as serving shareholders rather than building an empire. He spun off capital-intensive Time Warner Cable in 2009 and spun off shrinking Time Inc. (the magazine operation that included Fortune) in 2014. Those were smart moves. Over his tenure, Time Warner stock has outperformed the S&P 500.
Skeptics might object that AT&T’s takeover bid was an important factor in pushing the stock up. Absolutely true—but what’s wrong with that? There are many ways of delivering value to shareholders.
AT&T chief Randall Stephenson has managed for the long term on a scale that few CEOs will ever contemplate. When he got the top job in 2007, he gave the company a two-word mandate: “Mobilize everything.” He has invested hundreds of billions of dollars in infrastructure to support cell phones and other mobile communications devices (like cars) across the country. Those outlays will take years to pay off. When he saw media content and distribution converging rapidly, he agreed to pay about $80 billion for Time Warner. And when the Justice Department sued, he made the gutsy call to spend many more millions and seven months fighting for a highly uncertain outcome.
It would be crazy to predict how this combination will work out over coming years in such a volatile industry. What we can say for sure is that the CEOs behaved as CEOs are supposed to behave. It’s scandalous that their behavior is uncommon and noteworthy. But it is.