The Time Warner / Fox Merger Isn't Over Till It's Over

Was the withdrawal just another play in Murdoch's handbook? The Wire investigates the evidence.

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Rupert Murdoch announced the withdrawal of his $80 billion bid to buy Time Warner Tuesday afternoon, ending what would have been the biggest media merger in a decade.

It was a curt breakup. At 4:07 p.m. Tuesday, Time Warner CEO Jeffrey Bewkes received a surprise email from Murdoch that contained just one sentence:

On behalf of our board and senior management team, I am writing to inform you that we are withdrawing our offer to acquire Time Warner, effective immediately.

Sincerely, Rupert Murdoch.

But is it indeed the end? Is Murdoch actually walking away from what The New York Times has called "one of the biggest defeats" in his six-decade career?

Analysts are divided: Some say it's a done deal, that Murdoch's backed out. Others say it's a longer negotiating ploy, meant to force Time Warner's hand while the company's stock fell once Fox pulled away.

"Too much thought went into Fox's bid to think this is gone forever," Rich Greenfield of BTIG Research told The New York Times.

Let's examine the evidence.

Rupert Murdoch Wouldn't Give Up This Easily

Admitting defeat is uncharacteristic of the 83-year-old mogul known for his impressive empire. In 2007, he battled for Dow Jones and its properties, including The Wall Street Journal, by overpaying at $5 billion and steadily persuading the divided Bancroft family, the owners, to hand the reins over to him and Fox.

"I think Rupert Murdoch has shown he's a dealmaker," said Matt Campbell of Bloomberg. "He is someone who has gotten what he wants over time, so I don't think we can rule this out forever and ever."

Simply put, Murdoch is not known for giving up easily, and it's been less than a month since the bid was first made public. There could be more coming down the line for the Fox-Time Warner conflict.

Counterpoint: While Murdoch is an aggressive dealmaker, this is a "very hard deal to pull off," Campbell noted, and if Murdoch wants to continue to pursue the acquisition, he'll likely face the same obstacles and uphill battle he faced from Time Warner before, including financial reasons (Time Warner likely expected a higher bid), as well as the difference in company culture.

Even Disney CEO Bob Iger speculated in a Bloomberg interview that the "hostile circumstances" Murdoch faced likely turned the mogul off from going further.

Time Warner Will Want to Please Disgruntled Shareholders

When the bid was announced in July, Time Warner's shares rose from $71 to as high as $88, but in the after-hours trading Tuesday following the bid's withdrawal, shares fell 10.6 percent.

Thus, Fox's withdrawal not only places pressure on Time Warner to explain its rationale for rejecting negotiations, but also explain to shareholders why they gave up an opportunity that would have ultimately benefited the market. This double act "could easily be part of [Fox's] negotiating strategy," Brett Harriss, an analyst with Gabelli & Co., told Reuters. After all, Time Warner had gone as far as barring shareholders from calling special board meetings, cutting off all possible entry points to negotiating with Fox in the first place.

Counterpoint: Though stocks did fall for Time Warner, the company's quarterly earnings report released Wednesday showed overall gains, surpassing the expectations of Wall Street analysts. (Fox's quarterly results are expected to be released later in the day.)

It's been "another strong quarter," Bewkes said, "reflecting the strength of our businesses and our potential for continued growth." In other words, Time Warner is doing just fine without Fox—and that should be enough to handle peeved shareholders.

The Consolidation of Media Giants Is Inevitable

In the merger landscape, some analysts say it's inevitable a large deal like this will eventually make it, even if it's not between Fox and Time Warner.

"I think there has to be consolidation amongst content companies to counter the consolidation amongst the distribution companies—that is, Comcast, Time Warner Cable and AT&T and DirecTV," Tony Wible, senior media and entertainment analyst at Janney Capital Markets, told The Globe and Mail.

Basically, if Murdoch doesn't push for this one, someone else will—and maybe this will spur both companies to revisit negotiations for a merger.

Counterpoint: Maybe, but no. Time Warner has already moved on from the swift breakup. "It is not surprising that we might attract attention from others," Bewkes told his staff in a video. "Continuing to execute our strategic plan and our business plans will create significantly more value for the company and the shareholders and that's superior to any proposal that Fox is in a position to offer."

Sounds like he's prepared for a sweeter offer. Google, are you still mulling it over?

This article is from the archive of our partner The Wire.