Fox surges as AT&T's court victory appears to give its Disney deal the green light - but a bidding war could be on the horizon

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• A judge approved AT&T's $85.4 billion takeover of Time Warner on Tuesday, signaling that other deals could likely be approved as well.
• Disney, which wants to buy 21st Century Fox, sank in early trading as investors await a potential competing bid from Comcast
• Shares of Fox rose more than 7%, while Comcast sank about 3%

Shares of 21st Century Fox rose more than 7% in early trading Wednesday after a Federal judge ruled AT&T could buy Time Warner for $85.4 billion, largely seen as a positive sign for future mergers.

Disney, which has been mulling a $52 billion bid for Fox's production assets, excluding the Fox News and Fox Business Network channels, fell about 1.85% ahead of Wednesday's opening bell.

Comcast, the cable provider, will likely enter a competing bid for Fox to challenge Disney's if the AT&T deal was approved. A Comcast takeover of Fox would be similar to AT&T's so-called vertical merger with Time Warner in that it would combine two markedly businesses working at separate parts of the ecosystem. Comcast, a distributor of content, would have access to Fox's popular franchises like X-Men and the Avengers as well its its production studios, to broadcast to its subscribers.

"We see FOXA as a clear winner following today's ruling," John Janedis, an analyst at Jefferies, told clients in a note Tuesday. "Press reports suggest Comcast will come in with a $60B bid (all cash) vs. Disney's existing $52 billion bid (all stock). However, based on our merger models, we think bids from CMCSA or DIS could reach as high as $80 billion."

The approval on Tuesday, which both the Department of Justice and President Donald Trump had voiced opposition to, is likely to fuel more mergers in the space, Wall Street believes.

"M&A activity across the media and telecommunications landscape has largely been in a holding pattern awaiting the outcome of the T/TWX deal," said Janedis of Jefferies. "With the deal approved we think it could spur other M&A activity for the group."

Even outside of media, companies eyeing mergers saw their stock prices rise overnight.

CVS Health, which has proposed a $69 billion merger with health insurer Aetna, was up 1.73% while Aetna was up more than 3%. Express Scripts, which has agreed to be bought by Cigna for $67 billion, was up nearly 6%.

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