Media giant 21st Century Fox offered to buy competitor Time Warner for $80 billion.
Time Warner rejected the offer, saying “Time Warner’s strategic plan will continue to drive significant and sustainable value for Time Warner stockholders.”
In other words, Time Warner is telling 21st Century Fox to up its bid.
21st Century Fox’s big valued Time Warner at $85 per share, reports The New York Times’ Andrew Ross Sorkin and Michael De La Merced.
Despite the rejection, the stock is reacting. Shares of Time Warner, which closed at $71.01 on Tuesday, shot up by 15% in reaction to the news.
Rupert Murdoch, the CEO of 21st Century Fox, has a history of doggedly pursuing companies he wants. For instance, he was initially rebuffed when he tried to buy Dow Jones. But he kept at it and nine months later he closed the deal to buy Dow Jones.
But that was a different case entirely. Dow Jones was only $5 billion. And it was owned by a large family that was acutely aware that the newspaper business was dying. Murdoch was a last chance to cash out.
Time Warner, on the other hand, is a thriving corporation run by a smart CEO in Jeff Bewkes. He has much more leverage in any negotiation.
The details of the deal are interesting.
“As part of Fox’s proposal to buy Time Warner, people briefed on the proposal said, Fox indicated that it would sell CNN to head off potential antitrust concerns since Fox News competes directly with CNN,” reported New York Times’ Andrew Ross Sorkin and Michael De La Merced.
“Putting CNN on the auction block would likely stir up a bidding war for the news channel; both CBS and ABC, a unit of the Walt Disney Co., have long been seen as interested suitors.”
Shortly after Sorkin broke the story, Bloomberg’s Jeffrey McCracken reported “Twenty-First Century Fox Inc. is prepared to offer more than $85 a share for Time Warner Inc.”
Murdoch’s interest in Time Warner likely relates to the consolidation in media distribution companies. Comcast is buying Time Warner Cable, AT&T buying DirecTV, and Sprint reportedly looking at buying T-Mobile. As those companies gain more power, Murdoch thinks he needs to gain more control and power for his content companies.
The Time Warner Board, after consultation with its financial and legal advisors, determined that it was not in the best interests of Time Warner or its stockholders to accept the Proposal or to pursue any discussions with Twenty-First Century Fox. 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 Twenty-First Century Fox is in a position to offer.
In making its determination, the Time Warner Board considered, among other things, that:
- The execution of Time Warner’s strategic plan will continue to drive significant and sustainable value for Time Warner stockholders;
- 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;
- There is significant risk and uncertainty as to the valuation of Twenty-First Century Fox’s non-voting stock and Twenty-First Century Fox’s ability to govern and manage a combination of the size and scale of Twenty-First Century Fox and Time Warner; and
- There are considerable strategic, operational, and regulatory risks to executing a combination with Twenty-First Century Fox.
Time Warner’s Board also noted the consistent track record of Time Warner’s proven management team in achieving superior returns as well as completing a series of transactions to unlock value in related businesses, including the separation of AOL, Time Warner Cable, and Time Inc.
Under its strategic plan, Time Warner has delivered a total shareholder return of more than 150% since 2008, almost tripling the return of the S&P 500 over the same period, as management has pursued a disciplined approach to position the Company as a global leader in media and entertainment while managing its operations and capital structure to maximize shareholder returns.