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By Liana B. Baker
NEW YORK, July 18 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.
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.
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 are for various reasons not in a position to make a
Verizon Communications Inc, which last year paid $130
billion to buy Vodafone out of its U.S. wireless business
Verizon Wireless, is hampered by the $140 billion debt load that
it took on as a result.
Comcast Corp, which completed the acquisition of
NBC Universal last year, has its hands tied while waiting for
the government to approve its proposed $45 billion takeover of
Time Warner Cable. Bidding for Time Warner while that is
going on could scuttle the chances of getting the cable deal
Elsewhere, AT&T Inc, another large telecom company
that hardly produces any programming, is trying to close its
$48.5 billion takeover of satellite TV company DirecTV,
which is also awaiting regulatory approval.
As the media industry landscape evolves, technology
companies such as Google, Apple or Amazon could also be tempted
into bidding for Time Warner as opposed to trying to produce
video content on their own, people familiar with Time Warner's
Time Warner shareholder Mario Gabelli told Reuters Insider
TV on Wednesday that he thought both Google and Apple were
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.
"If I were Time Warner, I would wait. A year or two from
now, they will have competition for the assets actually," said
an industry banker who is not involved either with Time Warner
"The only downside of waiting is if you believe that
multiples are going to contract in the next year or two. Nobody
assumes that the markets are going down," the banker said.
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
"In our experience, if Mr. Rupert Murdoch wants an asset, he
will wait and pay to get it," ISI analyst Vijay Jayant said.
Still, Time Warner shareholders have told Reuters that
Murdoch will have to raise his bid and increase the cash
component to stand a chance of succeeding.
Also companies don't always get to choose the place and time
of a battle. Fox's overture could force another company to think
hard about making a competing bid, and Murdoch could get
Investors in cable and media have seen this movie before.
Earlier this year, Charter Communications went public
in its pursuit of Time Warner Cable and ended up losing out to
Comcast, which swooped in as a white knight with a surprise
offer of its own in February.
People familiar with Comcast told Reuters at that time that
while it had historically been intrigued by the idea of buying
Time Warner Cable, such a deal was not high on its priority list
until Charter started pursuing the company.
"By going public you could run into the unintended
consequence that other people start to think it's important for
them and they go after it," said a second industry banker.
(Reporting by Liana B. Baker, Editing by Soyoung Kim and Martin