Time Warner Shares Up After Rejecting 21st Century Fox Bid

Jul.16.14 | About: Time Warner (TWX)

By Clayton Browne

According to a July 16th article in the New York Times, Rupert Murdoch's Twenty-First Century Fox Inc. (NASDAQ:FOXA) recently made an $80 billion offer for Time Warner Inc. (NYSE:TWX) and was rejected.

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Chase Carey met with Time Warner's Jeff Bewkes

The sources say Time Warner Inc. was initially approached in the first week of June. Chase Carey, the president of Twenty-First Century Fox Inc., met with Time Warner's CEO, Jeff Bewkes. Towards the end of June, the company made a formal takeover proposal valued at $85 in stock and cash per Time Warner share.

The bid amounted to a 25% premium to Time Warner's stock price then, the sources elaborated. The deal was supposedly based on 60% of the price in stock and 40% in cash. Fox was planning to raise $24 billion to help pay for the transaction, but its bid was not dependent on financing. At $85 a share, Twenty-First Century Fox Inc. would be paying 12.6 times Time Warner Inc.'s earnings before interest, taxes, depreciation and amortization in 2013.

The combined firm would generate at least $1 billion in cost savings, primarily sales and administration staff. As part of its offer, 21st Century Fox committed to keeping Time Warner's most successful managers and creative executives and not to spin off assets.

Combined company would be a media colossus

A combined Twenty-First Century Fox Inc. and Time Warner Inc. would be a media colossus, including television networks and channels such as Fox, Fox News, FX, TNT and TBS; as well as HBO, studios like 20th Century Fox and Warner Bros and more. Combining Fox's expanding sports business with the broadcast rights that Time Warner owns in professional and college basketball and Major League Baseball, would also create a sports powerhouse.

Analysts estimate the new combined firm would have a total annual revenue of around $65 billion.

Spinning off CNN?

The NYT sources also noted that Twenty-First Century Fox Inc. indicated that it would likely sell CNN to alleviate potential antitrust concerns about the deal (given that Fox News competes directly with CNN).

Analysts say that putting CNN up for sale could start a bidding war, as both CBS and ABC have been considered suitors for the well-regarded news network for some time.

Disclosure: None

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