Rupert Murdoch has dropped his $80bn bid for Time Warner, insisting that while he still believes his offer has "strategic merit" he would not pursue the company "at all costs".
Had the deal gone through, Murdoch’s 21st Century Fox and Time Warner "would have created a colossus that loomed over the industry," the New York Times says, "combining the two biggest movie and television studios in Hollywood and enabling Fox to try to challenge ESPN's sports broadcasting dominance."
But some analysts believe the announcement may not be the end of his interest, but simply a strategic move towards the ultimate acquisition of the entertainment conglomerate.
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Why does Murdoch want Time Warner?
A merger between Fox and Time Warner would create an entertainment conglomerate bigger than Disney, and The Guardian says Murdoch wants to do the deal for sake of his business and his family. "The octogenarian has long been keen to secure a final mega-merger before handing the reins of his media empire to the next generation of the Murdoch family," the paper says.
The initial bid came at a moment when traditional media has begun to be challenged by new media, explains the New York Times. "By bidding for Time Warner, Murdoch's 21st Century Fox is seeking to create a colossus in the television and film industries at a time when both face pressure from the growing power of cable companies like Comcast and online video giants like Google."
If the deal did go through it would give Fox, which already owns the movie business behind films such as Avatar and Titanic, access to HBO's television programmes, including the huge worldwide hit show Game of Thrones. It would bring together disparate sports and entertainment products including Nascar, The Lord of the Rings, The Sopranos, Dawn of the Planet of the Apes and Major League Baseball, the New York Times notes.
So why has Murdoch dropped his bid?
Some analysts believe that this may be the end of Murdoch's interest in Time Warner, but Brett Harriss, an analyst with Gabelli & Co, told The Times: "This could easily be part of their negotiating strategy". Time Warner has so far refused to negotiate with Fox and has seen its stock price fall. Its shareholders have now called a "special meeting" Harriss said. "Those three things will act to put tremendous pressure on Time Warner management."
Why was his initial bid unsuccessful?
Before Murdoch's announcement that he was withdrawing his bid, Time Warner's board had rejected the media tycoon's overtones because it doubted Fox's ability to manage the newly enlarged business. The company also questioned the value of the deal to its shareholders. "There is significant risk and uncertainty as to the valuation of 21st Century Fox's non-voting stock and 21st Century Fox's ability to govern and manage a combination of the size and scale of 21st Century Fox and Time Warner," Times Warner said in a statement.
Another prospective stumbling block is that owning CNN as well as Fox, not to mention Time Warner's cable channel businesses including TNT, TBS and HBO would present regulatory issues. However, Murdoch has already indicated that he would be willing to sell CNN as part of any deal to prevent such problems.
Will the deal eventually go through?
According to the New York Times, "It is unclear whether Time Warner was simply engaging in the usual deal-making gamesmanship or if it really was determined to remain independent." Yesterday the company released a statement underlining its determination to resist Fox's bid: "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,” it said. “We thank our stockholders for their continued support".
Murdoch's biographer Michael Wolff told USA Today that "Murdoch would not have made the offer if he did not have reason to believe it would be successful".
What happens next?
While both companies are, for now, insisting that it is back to "business as usual," Rich Greenfield of BTIG Research says it is unlikely that this will be the end of the story. "Too much thought went into Fox's bid to think that this is gone forever," Greenfield said. "But now, for this to move forward, it's going to require Time Warner’s interest."
But as Forbes's Dorothy Pomerantz says, "Murdoch is a mogul who is not easily deterred".
