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Sometimes even a fox like Rupert Murdoch can’t find a way to get into the hen house. Tuesday evening, 21st Century Fox (NASDAX:FOXA) announced that it had officially withdrawn its offer to become the guardian of the Time Warner (NYSE:TWC) hen house. The share prices of both companies declined rapidly.
Murdoch, Chairman and CEO of Fox said, “Time Warner management and its Board refused to engage with us to explore an offer which was highly compelling. Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders. These factors, coupled with our commitment to be both disciplined in our approach to the combination and focused on delivering value for the Fox shareholders, has led us to withdraw our offer.”
What Went Wrong?
- Although Fox’s $80 billion offer was one of “significant strategic merit and compelling financial rationale,” in Murdoch’s opinion, the powers that be at Time Warner saw it somewhat differently. TWC felt that the offer at $85.00 per share in a combination of cash and Fox shares was $15.00 too low. They did not rebuff the offer entirely. They indicated that they would entertain negotiations only if the offer were much closer to the $100.00 per share mark.
- Things went south for Murdoch after the offer was made. Following placing the offer, the share price of Fox began dropping like a rock on 16 July, losing ground from 35.19 to 33.00, a 6% decline that day alone. It has continued downward every since, closing yesterday at 31.52, putting Fox into a position where it does not have the cash position to sweeten the pot enough to warrant Time Warner’s interest. Erik Gordon, a professor at the respected Stephen M. Ross School of Business, observed that, “In the end, Fox wasn’t strong enough to offer a compelling price.”
- Time Warner wasn’t really interested anyway. TWC’s board issued a statement today, saying that the company is, “committed to enhancing long-term value and we look forward to continuing to deliver substantial and sustainable returns for all stockholders. Time Warner is well positioned for success with our iconic assets, including the world’s leading premium television brand, the world’s strongest ad-supported cable network group, and the world’s largest film and television studio. We thank our stockholders for their continued support.”
