Twenty-First Century Fox to make an 'aggressive case' for Time Warner mergerTuesday 05 August 2014 08.28
Twenty-First Century Fox is expected to make an aggressive case for merging with Time Warner during its quarterly earnings call tomorrow, though people familiar with its plans said it would not use that forum to raise its bid.
Time Warner is also due to report its financial results tomorrow, marking the first time executives from both firms will publicly speak since the offer was first revealed on 16 July.
It will be an opportunity for Time Warner Chief Executive Jeff Bewkes to defend his record for shareholder value.
Fox's Chief Operating Officers Chase Carey and James Murdoch will have the chance to discuss the more than $1bn in cost savings and powerful combination of cable networks and sports programming.
It is unclear whether Rupert Murdoch, chairman and CEO of Fox, will make an appearance given the stakes.
Fox has offered to buy Time Warner for about $80bn, or about $85 per share, in a mix of cash and stock.
Time Warner turned it down, saying its plan to go it alone "is superior to any proposal" from Fox.
Though Fox is expected to raise its offer, it will not rise beyond the range of $90 to $95 per share, a person familiar with Fox told Reuters on 25 July.
The timing of another offer is unclear. Some analysts have said that an even higher bid would be needed to win over Time Warner management and shareholders.
A spokesman for Fox declined to comment.
A potential tie-up would create one of the world's largest media conglomerates, dominating content production with two major studios, a stable of cable networks like Fox News and TNT, broadcast networks and pay-TV channel HBO.
Faced with a rash of media distribution mergers, such as Comcast's proposed $45bn takeover of Time Warner Cable and AT&T's $48.5bn deal to buy DirecTV, programming creators are responding with their own potential deals to add clout for negotiations with cable and satellite distributors and new entrants like Netflix and Amazon.
Bernstein Research analyst Todd Juenger wrote in a note to investors on Friday that it would be in the interest of both companies to ink a deal. He and his team spoke to hundreds of Fox and Time Warner shareholders and concluded that "most people are supportive."
"To reject the $85 a share offer, you would have to believe that Time Warner would get to $95 a share on its own," he wrote. "We don't find very many people who think it will be easy to get there."
A Time Warner spokesman declined to comment.
With a backdrop of a rebuffed deal, Time Warner will be on the hook to explain why it is better off going solo.
Time Warner has outpaced its peers with 15.2% earnings per share growth for the past five years, nearly double the median for its competitors, according to Thomson Reuters data.
"Can Time Warner demonstrate to shareholders that left alone, the value to shareholders would be meaningfully greater than the $85 bid on the table from Fox?" Alan Gould, managing director at Evercore Partners Inc, asked in a research note.
For now, Gould pointed out that there does not seem to be an alternative bidder.