It’s hard to imagine leaving $80 billion on the table. But that’s exactly what Time Warner CEO Jeff Bewkes did in recent weeks, rejecting a buyout offer from 21st Century Fox.
The New York Times deal team of Andrew Ross Sorkin and Michael J. de la Merced had these details about the bid:
The media giant 21st Century Fox, the empire run by Rupert Murdoch, made an $80 billion takeover bid in recent weeks for Time Warner Inc. but was rebuffed.
The bold approach could put Time Warner in play and might again ignite a reshaping of the media industry, prompting a new spate of mega-mergers among the nation’s largest entertainment companies.
Shares of Time Warner were up nearly 17 percent in mid-afternoon trading.
Over nearly five decades, the 83-year-old Mr. Murdoch has built a global media juggernaut spanning studios, television channels and newspapers, in part, by pursuing bold deals that were often rebuffed at first by targets that would later acquiesce.
Writing for the Murdoch-owned Wall Street Journal, Amol Sharma said a deal of this size would change the face of media and entertainment:
Any deal, if consummated, would reshape the media industry. Time Warner’s lucrative cable channels, including TNT, TBS and HBO, would be part of a portfolio with 21st Century Fox’s FX, Fox News and the Fox broadcast network. The companies also would have the dominant film and TV studio business if Warner Bros. and Twentieth Century Fox were under one roof.
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Despite perceptions that Time Warner Chief Executive Jeff Bewkes is a likely seller, a person familiar with Time Warner’s thinking insists he isn’t interested in selling to 21st Century Fox, at least at the price Time Warner thinks Fox can afford. That doesn’t mean he is flatly opposed to selling, the person emphasized. If someone came along and offered a significantly higher price in cash, for instance, Time Warner might have a different view. Even so, the company isn’t planning to start an auction, the person said.
Time Warner is likely to highlight its strategic plans in coming days. The person noted that Mr. Bewkes had over the past few years re-engineered Time Warner—divesting itself of many of its units and putting in place new management atop each business unit—and believes it can perform better as an independent company than combined with Fox.
Vox’s Matthew Yglesias answered nine questions about the potential merger, touching on topics of sports and news as well as what a combination might mean for consumers:
6) Am I gonna get screwed if this happens?
Probably not. The reason that you are screwed, as a cable customer, is that there is very little competition in the cable industry. That, in turn, is not so much a failure of anti-trust policy as a reflection of the fundamental economics of infrastructure. There are better and worse ways to regulate (or not regulate) industries like cable television, but there’s no clearly correct solution. It’s simply a hard problem. Tim Lee reported on how you can counter-exploit the economics of low competition to get a better deal on your cable bill, but that’s about the best we can offer.
With that context as background, diminished competition among cable networks is unlikely to harm consumers. What’s happening is that cable companies are extracting monopoly rents from consumers, and if Murdoch gets his way he’ll be able to ensure that more of those rents flow into his pockets rather than Comcast’s pockets. You’re in the same boat regardless.
The Reuters story by Soyoung Kim and Liana B. Baker said Murdoch would likely have a tough time negotiating with Time Warner:
Time Warner Inc’s board, in rejecting 21st Century Fox Inc’s $80 billion bid, insisted the offer undervalued the media conglomerate and raised fears about the dominating role that Rupert Murdoch’s family would play, a person close to the situation said on Wednesday. The board worried about the future value of Fox’s shares, which represented 60 percent of the cash-and-stock proposal. Those fears were magnified by the lack of voting rights that would come with the shares, the source said, as that would concentrate too much power in the hands of Murdoch and his sons.
The board’s misgivings suggest the 83-year-old Murdoch faces a long, bruising battle in his bid to remake the global media landscape by swallowing Time Warner.
“To do a merger of this scale and size where Time Warner shareholders have no insight into the destiny of the company is very troubling,” the source, who was not authorized to speak on the record, told Reuters.
“Rupert is clear that he wants his sons to take over for him and that’s a real risk for Time Warner shareholders,” the person said, referring to James and Lachlan Murdoch.
The elder Murdoch’s proposal, fresh on the heels of his high-profile divorce and a damaging phone-hacking scandal involving his British tabloids, is staggering even for a media mogul whose ambitions are legendary.
Mark Sweney of The Guardian pointed out that Time Warner’s board is going to have to make a case for rejecting the offer:
The company’s board said it was “confident” that its own strategic plan was “superior” to any offer Fox could make.
“The board is confident that continuing to execute its strategic plan will create significantly more value for the company and its stockholders and is superior to any proposal that 21st Century Fox is in a position to offer,” it said. “The unique value of Time Warner’s industry-leading businesses including its portfolio of networks and its film studio and television production business is only going to increase.”
Claire Enders, founder of media research firm Enders Analysis, said: “Time Warner been a real laggard in stock market terms for a long time with a lot of great assets that can be plucked like a chicken. Even for 21st Century Fox this is a colossal deal. They are making a big play for more content and Time Warner has some of the best global franchises you could hope to have – look at Harry Potter, Batman and HBO.”
Time Warner’s lucrative cable channel business includes TNT, TBS and HBO, home to shows including Game of Thrones.
While the stage is set for a great battle, getting the deal past antitrust regulators across the globe won’t be easy. No matter if the combined company would shed some key assets, such as CNN, it will be challenging to convince regulators that a firm this large makes sense. As many people continue to be leery of consolidation, this deal, if an agreement can be reached, is still far from done.
