“Rupert Murdoch looks to have been canny in his $80 billion takeover approach to Time Warner Inc, cornering the media giant at a time when potential ‘white knight’ bidders are busy absorbing their own large deals,” Liana B. Baker reports for Reuters. “The absence of potential counter-bidders leaves Time Warner’s investors with a dilemma. They can either engage with Murdoch’s Twenty-First Century Fox Inc to negotiate a higher price, or play for time and wait until there are more potential buyers available.”
“Time Warner, owner of many highly-prized assets from HBO to Warner Bros, has rejected Fox’s initial cash-and-stock proposal of $85 per share. An eventual deal would transform the U.S. media landscape and cement Murdoch’s status as the most powerful magnate in U.S. media and entertainment,” Baker reports. “When Time Warner’s board rebuffed the approach it indicated it believes now is the wrong time to sell because the environment isn’t conducive to getting the best price, people familiar with Time Warner’s thinking said on Wednesday. That is mainly because a range of major media, telecom and technology companies [Verizon, Comcast, AT&T, and others] are for various reasons not in a position to make a rival offer.”
“Time Warner shareholder Mario Gabelli told Reuters Insider TV on Wednesday that he thought both Google and Apple were possible bidders,” Baker reports. “But for now, Google’s investment in content is focused on its YouTube unit while Amazon has spent money on original TV shows for its online video service. Apple’s media bets have so far been on music, illustrated by its purchase of Beats Music in May for $3 billion.”
“For Fox, stars seem to be aligned for a deal. Financing remains cheap, making it easy for Fox to borrow the cash it will need for the deal. Its stock, which Fox wants to use to finance 60 percent of its bid, is trading at a lofty multiple to earnings,” Baker reports. “‘In our experience, if Mr. Rupert Murdoch wants an asset, he will wait and pay to get it,’ ISI analyst Vijay Jayant said.”
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