Rupert Murdoch kicks off Time Warner takeover battle

Oliver Smith
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Fox chair and boss Rupert Murdoch
Rupert Murdoch has his sights on creating a $150bn (£88bn) media behemoth by shelling out $80bn for the takeover of Time Warner and merging it with his own 21st Century Fox empire, a plan that hit a roadblock last month when Time Warner rejected his advance.

Shares in Time Warner jumped 17 per cent to close at $83.13 yesterday after news broke that Murdoch was targeting the US media giant – despite Fox’s admission that discussions were not currently taking place.

Time Warner, owner of Game of Thrones maker HBO and the Harry Potter movie studio Warner Bros, issued a stinging rebuttal to Murd­och’s plan yesterday. Justifying its decision, the firm said it had rejected the bid as there was “significant risk and uncertainty” about 21st Century Fox’s “ability to govern and manage a combination”.

Despite being knocked back, Mur­doch is believed to be determined to get a deal done and is unlikely to abandon this ambition.

The first bid was worth about $85 per share, a 25 per cent premium at the time, and consisted of 60 per cent stock and the rest in cash.

The merged firm would boast a range of assets, including CNN, Fox News, HBO, movie studios 20th Century Fox and Warner Bros, as well as a stake in pay-TV operators BSkyB, Sky Italia and Asian network Star TV.

Murdoch’s desire to create a new US media giant will spread Fox’s dealmaking attention across two continents as it battles in Europe to consolidate its Sky holdings.

“This news comes at a time when Fox is already involved in two potentially massive consolidations – the takeover of Sky Italia and Sky Deutsch­land by BSkyB, and a joint venture between Fox TV production subsidiary Shine, Endemol and Core Media Group,” IHS analyst Tim Westcott said, adding that the acquisition of Time Warner’s content library could ultimately benefit BSkyB’s premium pay-TV business.

Any deal is likely to spark antitrust concerns from regulators, which could prompt the sale of CNN, a rival of Murdoch’s Fox News. Morgan Stanley analysts predict the news channel could fetch as much as $10bn.

Fox reportedly estimates that a com­bined company would save at least $1bn in costs, primarily by cutting sales staff and back-office functions.

Additional savings could justify Fox making a sweeter offer. The revenues of a combined company would be more than $60bn.

Fox is also in the middle of reorganising its television business as the network seeks to move itself out of last place among the big US broadcasters.

The shake-up of Fox’s TV units comes a year after the film and TV company was spun off from Murdoch’s News Corp, which now operates publishing assets such as The Sun and The Times.

Fox is being advised by Goldman Sachs and Centerview Partners, while Time Warner is working with Citigroup.

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