(Adds Fox shareholder comment, details about Time Warner)
By Jennifer Saba and Soyoung Kim
Aug 5 Rupert Murdoch's Twenty-First Century Fox
decided to pull its $80 billion offer to buy Time
Warner Inc on Tuesday, abandoning plans to create one of
the world's largest media conglomerates.
The surprise announcement appeared to cut short what many
investors had viewed as an inevitable battle of attrition over a
deal that would have joined two of Hollywood's biggest studios
and TV networks from TNT to Fox News.
Murdoch, who is Fox's chairman and CEO, cited Time Warner's
management and its board's refusal to come to the table to
discuss a takeover as one reason for the stunning turnabout.
"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," he
said in a statement released after the market closed on Tuesday.
Murdoch also cited Fox's share price - down about 11 percent
since the offer was unveiled on July 16 - saying it had become
undervalued, making the deal "unattractive to Fox shareholders."
Time Warner, which had fiercely resisted Murdoch's advance,
issued a statement saying it was committed to enhancing
long-term value. "We look forward to continuing to deliver
substantial and sustainable returns for all stockholders," the
Shares of Fox rose 10.4 percent in after-market trade after
closing at $31.30. Shares of Time Warner fell 10.7 percent after
closing at $85.19.
A source familiar with the matter said that there were no
other likely bidders for Time Warner at this point.
Still, Time Warner shares are trading at a premium to the
offer suggesting that some investors believe another buyer could
emerge or Fox may return.
Fox, which split off from News Corp last year, is serious
about walking away from Time Warner, additional people familiar
with the matter said, citing its announcement of a $6 billion
stock buyback at the same time. The people were not authorized
to speak to the media about the deal.
Still, Fox's withdrawal will raise pressure on Time Warner
to justify its refusal to engage in negotiations, the drop in
its stock price after the announcement and the fact that
bolstered takeover defenses by barring its shareholders from
calling a special meeting, said Brett Harriss, an analyst with
Gabelli & Co, who said Fox could still try again later.
"This could easily be part of their negotiating strategy,"
Both Fox and Time Warner are set to report their quarterly
earnings on Wednesday and will face questions from investors and
analysts about their future strategies.
The combined companies would have created a media powerhouse
with two major studios, cable networks, sports programming and
pay-TV channel HBO. A tie-up would have added more muscle to
negotiate against media distribution companies that have been
going through their own mergers like Comcast's deal to
buy Time Warner Cable and AT&T's proposal to
The move to walk away is an uncharacteristic one for
Murdoch, the 83-year-old media mogul known for his deal-making
He pounced on Dow Jones in 2007, the publisher of The Wall
Street Journal, after making an offer to the Bancroft family
that was too good to refuse.
At $5 billion, representing roughly a 67 percent premium,
many thought that Murdoch overpaid. News Corp had to write down
half the value a few years later.
Jason Subotky, partner and portfolio manager at Yacktman
Asset Management, a large Fox shareholder said, "They showed a
willingness to be bold with the proposal and yet were very
disciplined. We think this is recognition that buying their own
shares back is the most attractive use of capital at this
For now, today's statement from Murdoch signals that
shareholder value trumps desire.
"This significant return of capital underscores the
company's ongoing commitment to disciplined capital allocation
and returning value to shareholders in a meaningful way,"
Murdoch said in a statement, referring to the buyback plan.
(Additional reporting by Liana Baker, Ross Kerber and Lehar
Maan; Editing by Maju Samuel, Andrew Hay and Bernard Orr)