Time Warner chief executive Jeff Bewkes has hinted that the company might be up for sale, The New York Post reports, citing sources.
In a series of meetings with investors, Bewkes reportedly snubbed the idea of spinning off its prize assets, HBO or its Turner Broadcasting TV business, because he wants to “increase shareholder value.”
“Splitting up can destroy value,” he told one investor, pointing toward how Viacom’s struggling stock price since it was split up a decade ago, according to the New York Post. In the media business, scale matters.
Business Insider has contacted Time Warner for comment and we’ll update this article if we hear back.
Time Warner’s stock is currently at the ~$71 mark, but one analyst told The New York Post it could be worth $100 were it broken up — hence the reason some investors are pushing for a sale or breakup.
Time Warner’s other units include TNT, TBS, and the Warner Bros. movie studio.
Writing for The Street, Eric Jackson of SpringOwl Asset Management (which has shares in Time Warner,) said he “suspect[s] it will be bought this year.”
Who might be lining up to buy Time Warner?
The news comes two years after Time Warner turned down a takeover offer from 21st Century Fox, valued at $85 per share.
Fox is owned by media mogul Rupert Murdoch, who also owns New York Post parent company News Corp. The New York Post has been first to all the latest updates on a potential Time Warner sale. Could one of Murdoch’s lieutenants, or Murdoch himself, be stoking the fires?
Last week Benzinga reported that Fox lined up a $105 per share offer for Time Warner. A Fox spokesperson told Benzinga: “The report is categorically untrue.”
But BTIG analyst Rich Greenfield told The New York Post that acquiring Time Warner would be in both companies’ best interests: “They would have the finance to do it. It would involve selling down satellite TV service BSkyB in the UK and may require other spinoffs.”
However, Fox CEO Lachlan Murdoch told Variety Fox was not an interested party in Time Warner.
Carl Icahn or another activist investor?
As Reuters points out, another possible suitor for Time Warner might be activist investor Carl Icahn. Reuters claims Icahn has been buying up shares in Time Warner (CNBC quoted him as saying he owns nothing in the company.) Icahn also unsuccessfully led a campaign for Time Warner to be broken up in 2006.
The New York Post posited that Icahn (or another investor) might be the mystery buyer of $100 million of Time Warner call options. These options give the buyer the option to buy shares at a set price in the future, which means Icahn could be the purchaser but still be factually correct in saying he does not own any shares. However, Icahn did say he owns “nothing” in Time Warner.
Icahn’s former colleague, Keith Meister, now the founder of Corvex, is pushing Time Warner towards a sale or spinoff of its most valuable assets, according to the New York Post.
Investors feel they will get more bang for their buck were Time Warner’s best assets spun off. While Time Warner isn’t keen on an HBO spin-off, a potential buyer might be.
Both The New York Post and Eric Jackson suggest Apple might have an eye on Time Warner.
Time Warner would give Apple a smooth route in to launching a standalone senior TV service, in the form of HBO Now. Apple’s Eddie Cue, “has been keeping a tab on proceedings at Time Warner,” according to the New York Post.
Apple has long struggled to launch a streaming service of its own, largely due to its difficult to secure the content deals needed to stream premium shows to compete with the likes of Netflix and Amazon.
The New York Post writes: “A deal with Time Warner would give Apple most of what it needs: CNN news, Turner Sports and such hugely popular shows as ‘Game of Thrones’ and ‘Sesame Street’ from HBO — not to mention Warner Bros. movies and TV shows.”
Apple has more than $205 million in cash on its balance sheet, according to its latest SEC filing, so it could certainly afford to push some of that towards a bid. It would represent just a tiny, tiny fraction of the value of Time Warner, which currently has a market cap of $57.6 billion.
This, however, would be an unusual move for Apple which is a technology company focused on hardware, software, and services.
Another tech company?
Eric Jackson suggests other tech companies that could be interested in gobbling up Time Warner: Google and Amazon.
Referring to Amazon, he notes a report from the Sport Business Journal that suggests the company has been the “most aggressive” of the digital players to bid for the rights to stream NFL Thursday Night Football.
However, The Wall Street Journal’s Miriam Gottfried thinks that’s unlikely to happen. Back in August, she wrote an article that outlined the issues tech companies might face in acquiring TV businesses: “Paying a premium for a business model tied directly to the TV ecosystem the buyer seeks to disrupt;” the fact that for most tech companies a big deal would involve using stock, which could see some investors balk; and that the sheer size of Time Warner would be a huge distraction to the core business.
And let’s not forget what happened when AOL merged with Time Warner in a deal valued at $250 billion back in 2000. That merger has been dubbed “the worst in history” after the dot com bubble well and truly burst, the economy went into recession, and AOL had to take a goodwill write-off of nearly $99 billion in 2003. The total value of AOL’s stock was decimated from around $226 billion to $20 billion and the companies de-merged later that year.