Shares of Time Warner (TWX) soared today after it was revealed the media conglomerate rejected an $80 billion takeover offer from Rupert Murdoch's 21st Century Fox (FOX). Time Warner said it was not in the best interest of stockholders to accept the offer or to pursue discussions. Time Warner CEO Jeff Bewkes said the offer was rejected on July 8. In a statement, 21st Century Fox confirmed an offer was made, but the two companies aren’t currently in discussions.
A combined company would join Warner Bros. movie studio, premium cable channel HBO and Turner Broadcasting, with 20th Century Fox movie studio, the Fox broadcast network, Fox News Channel, as well as other broadcast, cable, production and online properties. The New York Times reported that as part of the offer, first made in June, 21st Century Fox would sell Time Warner-owned CNN to clear any regulatory hurdles.
Reuters reported that the $85 a share offer was split between 60% in stock and the rest in cash. Sources told the Times that 21st Century Fox estimated the combined company would create at much as $1 billion in savings by cutting staff and back-office functions.
Art Hogan, Managing Director and Chief Market Strategist at Wunderlich Securities, said that when one looks at the synergies these companies would have on strategic, business and financial levels, along with ad revenue and ad sharing possibilities, as well as the portfolio of properties, putting the companies together is “a massive idea.”
While Time Warner rejected this offer, it may not be the last. Hogan said that the reason a company goes public with an offer is to test the regulatory waters, and to hope shareholders pressure the company to sell. “Usually the first foray into something like this is not the last one we’re going to hear about,” he said.