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Friday 19 September 2014

Rupert Murdoch abandons bid for Time Warner

21st Century Fox announces plans to launch $6bn share buyback after walking away from massive media deal

Andrew Trotman

Published 06/08/2014 | 07:33

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"In the United Kingdom, which has been kept pretty honest by a free press, the brilliance and ruthlessness of Rupert Murdoch introduced a reign of tabloid terror that caused the establishment to bend its knee," writes Ruth Dudley Edwards. (REUTERS/Jason Reed)
"In the United Kingdom, which has been kept pretty honest by a free press, the brilliance and ruthlessness of Rupert Murdoch introduced a reign of tabloid terror that caused the establishment to bend its knee," writes Ruth Dudley Edwards. (REUTERS/Jason Reed)

Rupert Murdoch has withdrawn his offer to buy Time Warner, walking away from a deal that would have created the world’s largest film and television company.

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21st Century Fox, the media tycoon's entertainment holding company, cited Time Warner's refusal to engage in talks over an $80bn bid as the reason for its withdrawal, as well as a 2pc fall in Fox's share price since the offer was revealed.

In a statement, Mr Murdoch, Fox's chairman and chief executive, said: "We viewed a combination with Time Warner as a unique opportunity to bring together two great companies, each with celebrated content and brands. 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.

"Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders.

"These factors, coupled with our commitment to be both disciplined in our approach to the combination and focused on delivering value for the Fox shareholders, has led us to withdraw our offer."

Fox's shares jumped 7.3pc in after-hours trading on Tuesday, hitting $33.30. Time Warner's dropped more than 12pc to $75.59.

However, Brett Harriss, an analyst at Gabelli & Co, did not believe this was the end of the matter.

"This could easily be part of their negotiating strategy," he said.

However, a source said that this was not a deal Fox needed to do and that it was simply a unique opportunity.

The Fox board has also authorised a $6bn share repurchase programme, which will be completed over the next 12 months.

Mr Murdoch added: “This significant return of capital underscores the Company’s ongoing commitment to disciplined capital allocation and returning value to shareholders in a meaningful way."

Time Warner, owner of the film studio Warner Brothers and the pay-TV channel HBO, which specialises in big budget drama serials such as Game of Thrones, revealed on July 16 that 21st Century Fox had offered $80bn in a mixture of cash and stock to aquire the rival company.

Mr Murdoch believed that with revenues of $65bn, and cost savings of $1bn, the combined company would be better able to stand toe-to-toe in distribution negotiations with tech giant such as Apple and Google, and with rapidly consolidating cable and satellite distributors.

Jeff Bewkes, Time Warner’s chief executive, said after rejecting the offer: “The board, after consulting with our financial and legal advisors, determined that it is not in the best interests of Time Warner or our shareholders to accept the proposal or to pursue any discussions with Fox.

“Quite simply, the board concluded that continuing to execute our strategic plan and our business plans will create significantly more value for our business and shareholders, and that that’s superior to any proposal that Fox is in a position to offer.”

On top of its belief in its value as an independent media company, Time Warner said it had concerns that Fox would not be able to properly manage the size and scale of the combination that would be created.

It also noted that the Fox shares offered as part of the bid were non-voting, meaning that the Murdoch family, which owns Fox voting shares, would control the merged company. The two-tier share structure has been controversial as non-voting shareholders have questioned decisions such as the appointments of Mr Murdoch’s sons James and Lachlan to senior executive positions.

In a statement on Tuesday night, Time Warner said: "Time Warner’s Board and management team are committed to enhancing long-term value and we look forward to continuing to deliver substantial and sustainable returns for all stockholders.

"Time Warner is well positioned for success with our iconic assets, including the world’s leading premium television brand, the world’s strongest ad-supported cable network group, and the world’s largest film and television studio.

"We thank our stockholders for their continued support."

Both companies plan to report earnings results on Wednesday night.

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