Fox Withdraws Proposal To Buy Time Warner -- And Time Warner Shares Are Crashing

Rupert murdochREUTERS/Jason ReedRupert Murdoch, executive chairman of News Corporation, reacts during a panel discussion at the B20 meeting of company CEOs in Sydney, July 17, 2014. The B20 was set up in 2010 to give policy recommendations on behalf of the international business community to the G20 member countries.

Fox has withdrawn its plans to purchase Time Warner according to an announcement the company just made.

Time Warner shares are down 11% post-market on the news.

Reports of an original proposal had surfaced in June, and the expectation was that Fox would put in a higher offer. That caused shares of Time Warner to surge above the $US85/share that was reportedly offered.

A source told Reuters that Fox’s offer for Time Warner would not rise above the $US90 to $US95 range, and sources told Business Insider that shareholders were concerned that Rupert Murdoch, Fox’s CEO, might overpay for Time Warner.

The merger would have created one of the world’s largest media conglomorates, including properties like TNT, HBO, and Fox News. CNN, Time Warner’s news network, would likely have been spun off and sold.

Fox also announced that it has authorised a $US6 billion share buyback, likely an attempt to assuage potentially disappointed shareholders. The stock is up almost 7% in post-market trading.

From the press release:

Chairman and CEO Rupert Murdoch commented:

“We viewed a combination with Time Warner as a unique opportunity to bring together two great companies, each with celebrated content and brands. Our proposal had significant strategic merit and compelling financial rationale and our approach had always been friendly. However, Time Warner management and its Board refused to engage with us to explore an offer which was highly compelling. Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders. These factors, coupled with our commitment to be both disciplined in our approach to the combination and focused on delivering value for the Fox shareholders, has led us to withdraw our offer.

“21st Century Fox’s future has never been brighter. The strength of our leading franchises, combined with the power of our emerging growth businesses and the leadership positions of our international enterprises put us on a path for even greater success.”

The Board today authorised a $US6 billion share repurchase program. The repurchase of an additional $US6 billion of Class A Common Stock is expected to be completed in the next 12 months.

Mr. Murdoch continued, “This significant return of capital underscores the Company’s ongoing commitment to disciplined capital allocation and returning value to shareholders in a meaningful way.”

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