Twenty-First Century Fox (NASDAQ: FOXA) (FOX) Looks To Acquire Time Warner (NASDAQ: TWX)

499

By Erik Waters on July 19, 2014 Company, Technology & Software

It has been reported that Time Warner Inc. (NASDAQ: TWX) has said no Twenty First Century Fox (NASDAQ: FOXA) (FOX)’s offer to merge the two entertainment companies. Twenty First Century Fox also disclosed that it is not currently in talks with Time Warner.

In June Rupert Murdoch, the CEO of Twenty-First Century Fox, made his biggest and boldest bid yet. He offered $80 million, or $85 in stock and cash for each share of Time Warner, for to purchase the huge entertainment company. If this deal went through, it would have been the largest media deal in over ten years.

Time Warner holds HBO, a cable movie channel, and Warner Bros Studios, the movie studios. Twenty-First Century Fox owns Fox Broadcasting and 20^th Century Fox. The combination of these two companies would bring together some of the most biggest and most lucrative sources of content in the industry.

The deal falls short of America Online’s bid for Time Warner back in 2000, which was valued at $165 billion.

According to anonymous sources, if the deal were made, Twenty-First Century Fox would have sold CNN in order to keep in line with anti trust laws, because the company’s Fox News Network directly competes with the news network.

Despite Time Warner’s rejection, sources revealed that Murdoch is determined to make a deal between the two entertainment giants. After all, Murdoch has a reputation for not walking away from companies that first said “no” before giving in to his pursuits.

Murdoch’s quest for Time Warner is very likely to incite buyout cases involving other companies in the industry – due to the pressure other companies feel to keep up. Murdoch is seeking to build a single colossal syndicate in the television and film industry. This unification would benefit both Time Warner and Twenty-First Century Fox because growing cable companies such as Comcast Corporation (NASDAQ: CMCSA) and online video providers like Google (NASDAQ: GOOG) (GOOGL) are increasing their power and pressure on others in the space.

The acquisition of Time Warner would give Twenty-First Century Fox a huge leg up, such as getting the best programming and movies, the rights to various channels both on cable and online. The deal would give Fox Sports vital exclusive broadcasting rights to professional and college basketball and Major League baseball – valuable assets as the company plans to challenge ESPN.

The shares of Time Warner are shooting straight up in premarket trading in wake of the news, having jumped 17% to $83.13. On the other hand, Twenty-First Century Fox’s share prices dropped 6% to $33.

This news comes in the wake of a year full of mergers and buyouts. In the cellphone industry, Comcast Corporation (NASDAQ: CMCSA) and AT&T Inc (NYSE: T) are focusing on immense takeovers that will give them more power in negotiations regarding fees with companies like Viacom, CBS, Twenty-First Century Fox, and Time Warner.

Twenty-First Century Fox is also facing competition from internet giants such as Google, Netflix, and Amazon, who develop their own original content and are working to become the next generation of television.

According to analysts, the way for entertainment companies to compete against these content producers and maintain their leverage is by joining forces. One thing is for sure – media executives all agree that size matters.