Time Warner stock dropped 11 per cent overnight after Rupert Murdoch announced that Fox had withdrawn its $76- billion offer to buy Time Warner Inc.
Fox shares immediately jumped 10 per cent in after hours trading while Time Warner fell in response to news the merger of media titans was a non-starter. Traders had been betting that Murdoch would have to raise his bid for Time Warner, which amounted to $86.30 a share and the announcement ended hopes of a sharp runup in the stock's price.
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On Wednesday morning, Time Warner was trading at $75.51 and Fox was trading at $32.95, up five per cent.
Time Warner’s board had firmly rejected the bid which would have seen the company that owns Fox News taking over the company that owns CNN. It said the offer was not high enough and it had doubts about Murdoch's plans for the future of Time Warner.
Murdoch said Time Warner’s antipathy toward the deal, and the hit Fox shares took after it was proposed, helped him decide to abandon the bid.
“We viewed a combination with Time Warner as a unique opportunity to bring together two great companies, each with celebrated content and brands,” Murdoch said in a statement.
“Our proposal had significant strategic merit and compelling financial rationale and our approach had always been friendly. However, Time Warner management and its board refused to engage with us to explore an offer which was highly compelling.”.
Murdoch said the bid caused Fox stock to become “undervalued” and shareholders would be better served by abandoning the offer, an indication he had come under pressure from his shareholders over the deal.
Instead, the Fox board authorized a $6 billion share repurchase program. The repurchase of an additional $6 billion of Class A Common Stock is expected to be completed in the next 12 months.
The bid showed the increased investor interest in movie and TV assets over print-based ones. Murdoch's News Corp. split into two companies last year: The newspaper and publishing portion, still called News Corp., and the more-profitable film-and-TV unit, Twenty-First Century Fox Inc.
Comcast Corp. has proposed a $45-billion takeover of Time Warner Cable Inc. in February and AT&T Inc. announced in May it agreed to buy DirecTV for $48.5 billion.
The combination of Time Warner and Fox would have created a movie-and-television powerhouse that controlled the 20th Century Fox movie studio, Fox broadcast network, Fox News and FX along with Warner Bros. movie studio and TV channels such as TNT, TBS and HBO.
It did face significant anti-trust hurdles, as do the Comcast and AT&T deals. Merging Fox News and CNN would also have been a bit of a culture clash.
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.