November 27, 2014
Murdoch abandons pursuit of Time Warner
Rupert Murdoch’s 21st Century Fox is abandoning its attempt to take over Time Warner in a proposed deal that would have combined two of the world’s biggest media companies.
The about-face announced yesterday comes three weeks after Time Warner Inc. revealed that it had rejected 21st Century Fox’s unsolicited US$76 billion buyout offer.
Murdoch, a voracious dealmaker throughout his colourful career, had envisioned creating a movie-and-television powerhouse by devouring Time Warner. Twenty First Century Fox owns the 20th Century Fox movie studio, Fox broadcast network, and cable-TV channels Fox News and FX while Time Warner’s stable includes the Warner Bros. movie studio and TV channels such as TNT, TBS and HBO.
“Time Warner management and its board refused to engage with us to explore an offer which was highly compelling,” Murdoch, 83, said in a statement today. “Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders.”
Fox doesn’t plan to make another bid for Time Warner and is focusing on its standalone plan, company sources said yesterday. Tomorrow’s planned earnings announcement pressured Fox to make a decision about its approach for Time Warner, they said. Time Warner also reports earnings results tomorrow.
Fox executives were surprised they couldn’t get Time Warner to engage or discuss a bid at all, said the sources, and the two sides didn’t speak after Time Warner sent a letter rejecting the bid.
“I can only speculate that Rupert didn’t want to pursue it under hostile circumstances, but I don’t know that for sure,” Bog Iger, Chairman and CEO of Walt Disney Co., said in an interview on Bloomberg TV today.
Some analysts had expected Murdoch to continue stalking Time Warner, reasoning that the billionaire viewed a takeover as an opportunity to gain a better bargaining position to sell its video content at a time when video distributors are muscling up too.
But 21st Century Fox would have had to navigate potentially daunting antitrust hurdles to buy Time Warner. Cultural clashes also loomed had the two companies combined, a factor that turned Time Warner’s merger with AOL Inc. in 2001 into a monumental flop. Time Warner and AOL eventually split, but not before costing their shareholders tens of billions of dollars.
Time Warner had made it clear that it intended to staunchly resist Murdoch’s overtures.
In a statement yesterday, Time Warner sought to reassure its shareholders. “We look forward to continuing to deliver substantial and sustainable returns,” the New York company said.
In his own statement, Murdoch said his New York company’s “future has never been brighter.”
With the proposed Time Warner deal off the table, 21st Century Fox’s board approved a plan to spend US$6 billion on buying back stock.
Murdoch cited a decline in the New York company’s stock price since the takeover bid was announced as one of the reasons for the change of heart. Fox’s shares have dropped 11 percent. They rose US$2.49, or eight percent, to US$33.79 in extended trading yesterday.
Meanwhile, investors betting that Murdoch was going to sweeten his offer bailed out of Time Warner. Its stock fell US$8.39, or nearly 10 percent, to US$76.80 in extended trading. Even with Fox out of the picture, Time Warner’s stock remains above its price before Murdoch’s interest was revealed.
This isn’t the first time that Murdoch has walked away from a deal that he once seemed to prize.
In 2008, he gave up on buying DirecTV in 2008 through another company, News Corp., after Liberty Media Corp. chairman John Malone outmanoeuvred him. He also withdrew a bid to boost News Corp.’s stake in British Sky Broadcasting Group PLC in 2011 amid outrage over a phone hacking scandal at News Corp.’s British newspapers.
Murdoch’s News Corp. split into two companies last year: the newspaper and publishing portion, still called News Corp., and the film-and-TV unit, 21st Century Fox Inc.
Herald with AP, Bloomberg