19 November 2017

Fox’s Proposed Takeover of Time Warner

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Rupert Murdoch's Twenty-First Century Fox Inc is expected to make an aggressive case for merging with Time Warner Inc during its quarterly earnings call on Wednesday, though people familiar with the company's plans have said it would not use that forum to raise its bid.

Time Warner is due to report its financial results on Wednesday as well, marking the first time executives from both companies will publicly speak since the offer was first revealed on July 16. It will be an opportunity for Time Warner's Chief Executive to defend his record for shareholder value. Fox's Chief Operating Officers will have the chance to discuss the more than $1 billion in cost savings and powerful combination of cable networks and sports programming.

Fox has offered to buy Time Warner for about $80 billion, or about $85 per share, in a mix of cash and stock. Time Warner turned it down, saying its plan to go it alone "is superior to any proposal" from Fox.

Though Fox is expected to raise its offer it will not rise beyond the range of $90 to $95 per share. The timing of another offer is unclear. Some analysts have said that an even higher bid would be needed to win over Time Warner management and shareholders.

A potential tie-up would create one of the world's largest media conglomerates, dominating content production with two major studios, a stable of cable networks like Fox News and TNT, broadcast networks and pay-TV channel HBO.

Faced with a rash of media distribution mergers, such as Comcast Corp's proposed $45 billion takeover of Time Warner Cable and AT&T's $48.5 billion deal to buy DirecTV, programming creators are responding with their own potential deals to add clout for negotiations with cable and satellite distributors and new entrants like Netflix and Amazon.

Analysts believe it would be in the interest of both companies to ink a deal. With a backdrop of a rebuffed deal, Time Warner will be on the hook to explain why it is better off going solo.

According to Thomson Reuters data, Time Warner has outpaced its peers with 15.2 percent earnings per share growth for the past 5 years, nearly double the median for its competitors. For now, there does not seem to be an alternative bidder.

Click here to access the full article on Reuters.

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