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Time Warner takeover failed, the United States of America

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On hearing the news of Murdoch’s open offer, investors were so enthused by the deal that the shares of Time Warner jumped by as much16.4 percent, rising to $82.70, its highest price for over 13 years. Excited investors were only too eager for the deal to be consummated, buying into it even before it came to fruition. Shares of the 21st Century Fox, on the other hand, dropped by a marginal figure of 1.7 percent to $33.49, which is the usual norm in the market for an acquirer in involved in a big acquisition.

But why does Rupert Murdoch really want to acquire Time Warner? Is there a sound logic to this deal, considering the regulatory roadblocks that will only naturally placed before it, keeping in mind the United States’ strict anti-trust laws? To understand this, we shall need to understand a little about Murdoch’s businesses – 21st Century Fox and News Corporation.

Together, the two companies own the most popular newspapers, tabloids and magazines in Australia, United Kingdom and the United States, including the much respected Wall Street Journal, America’s premier finance daily.
Murdoch owns the Fox Network, the company behind the highly popular (and very controversial) Fox News, and Twentieth Century Fox, which is one of the biggest movie studios in the world based in Hollywood, Los Angeles. Besides this, Murdoch owns a gamut of media properties in Europe and Asia.

But why merge with Time Warner, when Murdoch already has so much? Well, while Murdoch does have the world’s biggest media business, there are several chinks in his armor. Such as a sports network that is able to compete head on with Disney’s ESPN.

Merging with Time Warner, which has a right over the telecast of professional baseball and basketball in the United States, would allow Murdoch to compete better with ESPN. Also, a marriage with Time Warner would give Murdoch control over a library of a thousand priceless film titles such as “Harry Potter,” “Avatar,” “Titanic” and classics such as “The Sound of Music” and “Casablanca.” Murdoch would also own the priceless HBO channel and its several valuable properties.

Another important consideration for Rupert Murdoch is that while his Fox News is the biggest news network domestically in the United States, internationally Fox News is nowhere in the picture. So if Murdoch could get his hands on the globally renowned CNN, he could finally aspire to the global respectability that he has always craved for in the TV news business.

Lastly, by owning the prime properties in news and entertainment, he would be in a better position to negotiate for more profitable contracts with cable companies such as Comcast.

However, Murdoch’s offer was categorically rejected by the Time Warner management which insisted that the company was not for sale and also that there would be no negotiation. But analysts suggest this to be just a negotiating maneuver, and that Time Warner was certainly for sale, but at the right price. Some analysts say that Murdoch would have to increase the cash component of the deal to make his offer more attractive to the Time Warner management and the board of directors.

The shares of Time Warner show no signs of lagging down as they continue their upward trend, in spite of the refusal by the company to consider the deal. Wall Street is seemingly certain that the deal will get through in the end, as Rupert Murdoch’s ability to get what he wants, no matter how difficult, is a stuff of Wall Steer lore.

Author: Raghav Hedge – India

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