Murdoch Withdraws Takeover Bid from Time Warner (NASDAQ:TWX) as 21st Century Fox (NASDAQ:FOX)’s Shares Fall

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By Mark Michaels on August 6, 2014 Consumer Staples

Who hasn’t heard of HBO’s famous and hit TV series, Game of Thrones. Westeros sees fleeting victories. You find that the heroes in one episode often end up the corpses of the next episode. Time Warner (NASDAQ:TWX) is the parent company of HBO. Its shareholders held similar feelings. Even though the profits for the current quarter rose by 10% as compared to last year, however, Time Warner (NASDAQ:TWX)’s stocks fell by 11% on Wednesday. All thanks to Rupert Murdoch. On Tuesday evening, he had pulled back a takeover bid worth $80 billion for the company i.e. Time Warner (NASDAQ:TWX). On Wednesday, the company reported a revenue of about $6.8 billion in the second quarter of the current fiscal. This was 3% more than the revenue generated in the same quarter previous year. The net income of the company was about $850 million, having increased by 10%.

Last year, the earnings reported were 76 cents per share. This year, after making adjustments, the EPS reported was 98 cents. The earnings reported were higher than the Wall Street consensus estimate by 14 cents. Time Warner (NASDAQ:TWX) rechecked the guidance for its entire year’s earnings per share, after making adjustments, in the earlier years. The EPS generated in 2013 fiscal were about $3.51. Jeff Bewkes, the CEO HBO, said that his company is planning to be among the world leading video content companies. He also said that the quarter represents the company’s strength and potential to grow and achieve its aims. He pointed out that HBO has gained 99 Emmy nominations all due to hit TV series like True Detective, Silicon Valley and Game of Thrones. These are more than the nominations received by any other video content providers.

Time Warner (NASDAQ:TWX)’s Turner segment generated the highest TV revenue valued at about $2.8 billion. HBO however has seen the highest growth rate. It gained about 16.5% and generated revenue of $1.4 billion. The Warner Bros division of the company, however, declined. Its revenue decreased by 2.4% and closed at $2.9 billion. This is a fairly good earnings report. Yet, Time Warner (NASDAQ:TWX) stared its Wednesday trade at 12% lower, falling to $74.51. This fall occurred when Murdoch withdrew the $80 billion bid to take over Time Warner (NASDAQ:TWX).

After the trading day closed on Tuesday, Murdoch reportedly said that this merger was a unique opportunity. He said that the combination of the companies, 21^st Century Fox (NASDAQ:FOX) and Time Warner (NASDAQ:TWX), will prove to be a hug revenue generator and that such an opportunity has immense strategic virtue as well as financial rationale. Murdoch said that he was withdrawing from his offer because the target did not seem in reach as a part of the bargain. As a result of Fox (NASDAQ:FOX)’s bid, Time Warner (NASDAQ:TWX)’s stock increased and Fox (NASDAQ:FOX)’s own stock fell in the market. After the takeover bid was made public, through Tuesday, Fox (NASDAQ:FOX) fell by 11% while Time Warner (NASDAQ:TWX) increased by 20%.