NEW YORK Time Warner Inc (TWX.N) withdrew its bid to buy the Weather Channel after refusing to raise its offer, leaving NBC Universal and its partners in exclusive talks with the network's owner, Landmark Communications.
"The consortium made up of NBC Universal and the private equity firms of Blackstone and Bain has been selected to participate in exclusive negotiations to purchase the Weather Channel," General Electric's (GE.N) NBC Universal said in a statement that resembled prepared remarks by Landmark.
The statement came after a source familiar with the negotiations told Reuters earlier on Friday that Time Warner had withdrawn from the bidding.
Time Warner Chief Financial Officer John Martin told investors last week the media conglomerate would be interested in pursuing a deal but would be "extremely price disciplined and price sensitive." It was not clear how much Time Warner had offered.
Shares of Time Warner, which declined comment, closed up 3.5 percent.
"They're still interested in acquisitions, but they're going to be disciplined in the price they pay," said Christopher Marangi, an associate portfolio manager at Time Warner investor Gabelli & Co.
The NBC Universal, Blackstone Group LP (BX.N) and Bain Capital consortium offered an estimated $3.5 billion to buy the cable network that produces national, regional and local weather-related programming and other properties, sources said earlier.
Sources previously told Reuters the consortium would divide $1.8 billion of equity roughly equally in their bid, which would be worth about $3.5 billion, including debt. Blackstone's GSO Capital -- a hedge fund firm specializing in leveraged debt -- would provide about $600 million in debt, another source told Reuters.
The Weather Channel network serves about 96 million U.S. subscribers and can be seen in more than 97 percent of all cable television homes.
TIME WARNER OPTIONS
The latest development would leave Time Warner free to pursue other cable networks, which media analysts largely anticipate.
Time Warner is due to receive a $9 billion payout when it separates its cable services by the end of the year. Walking away from the Weather Channel negotiations is seen allaying investor fears the company would overpay for deals with that much cash in the coffer.
Marangi, in a research note on Friday, said Microsoft Corp's (MSFT.O) failed attempt to seal a deal to buy Yahoo Inc's (YHOO.O) search technology could also push the software giant closer to Time Warner's AOL Internet division.
"A combination with AOL might be Microsoft's second-best option," he wrote. "No other available Internet asset possesses its breadth or scale. An acquisition of AOL would modestly increase Microsoft's search share, boost its page views and give it the dominant third-party ad network in Platform A."
Marangi valued AOL's Web sites and advertising business at $12 billion and its dial-up Internet business at $2.8 billion.
Time Warner Chief Executive Jeffrey Bewkes suggested at an investors conference on Monday it was in the mix of current discussions seen redrawing the Internet landscape.
"There's a lot going on in terms of the various owners, whether it's Microsoft, Yahoo, floating around trying to figure out who should dance with who," he said at a Deutsche Bank media conference. "And I think that could implicate AOL or parts of AOL."
(Editing by Mark Porter and Brian Moss)