Rupert Murdoch's Twenty-First Century Fox has decided to pull its $80 billion offer to buy Time Warner, abandoning plans to create one of the world's largest media conglomerates.
The surprise announcement was made last night.
It appeared to cut short what many investors had viewed as an inevitable battle of attrition over a deal that would have joined two of Hollywood's biggest studios and TV networks from TNT to Fox News.
But some investors wondered whether the move could be an effort to drive down the stock, prompting Murdoch to re-enter the fray later on.
Murdoch, who is Fox's chairman and CEO, cited Time Warner's management and its board's refusal to come to the table to discuss a takeover as one reason for the stunning turnabout.
"Our proposal had significant strategic merit and compelling financial rationale and our approach had always been friendly. However, Time Warner management and its board refused to engage with us to explore an offer which was highly compelling," he said in a statement released after the US market closed last night.
He also cited Fox's share price - down about 11% since the offer was unveiled on July 16 - saying it had become undervalued, making the deal "unattractive to Fox shareholders."
The news of the collapse of the Fox-Time Warner deal was followed by the implosion of another deal: Sprint Corp's surprise decision to drop its pursuit of T-Mobile US.
It was unclear whether the two cancelled deals presaged any kind of a wider slowdown in what has been a busy M&A market in recent months.
Time Warner, which had fiercely resisted Murdoch's advance, issued a statement saying it was committed to enhancing long-term value.
"We look forward to continuing to deliver substantial and sustainable returns for all stockholders," the statement said.
A source familiar with the matter said that there were no other likely bidders for Time Warner at this point.
But Time Warner shares are trading at a premium to the offer, suggesting that some investors believe another buyer could emerge or Fox may return.
But additional people familiar with the matter said Fox, which split off from News Corp last year, is serious about walking away from Time Warner. They cited its announcement of a $6 billion stock buyback.
Game of Thrones boost Time Warner's results
Time Warner today reported a 3% jump in quarterly revenue, helped by the popularity of "Game of Thrones" and other shows on its HBO network.
Time Warner shares were down 13% before the bell today, a day after Rupert Murdoch's Twenty-First Century Fox abandoned an $80 billion bid for the company.
Revenue from Time Warner's Home Box Office (HBO) unit rose 17% to $1.42 billion for the second quarter.
The company said the fourth season of "Game of Thrones," which ended in June, was the most watched season of an original series in HBO's history. The Emmy award-winning fantasy epic had an average gross audience of 19 million viewers.
The company's Turner Networks unit - home to CNN, TBS and TNT - also posted an increase in revenue, helped by higher subscription and advertisement sales.
Net income from continuing operations attributable to Time Warner common shareholders rose to $843m, or 94 cents per share, for the three months ended June 30 from $698m, or 73 cents per share, a year earlier.
Revenue increased to $6.79 billion from $6.61 billion.
Analysts on average had expected a profit of 84 cents per share on revenue of $6.87 billion, according to Thomson Reuters.
The company, which also owns the Warner Bros movie studio, forecast full-year 2014 adjusted profit growth in the low teens in terms of percentage, off a base of 2013 adjusted earnings of $3.51 per share.
Time Warner said in April that it expected its full-year adjusted profit to grow in the low- to mid-teen percentage range, or better, for at least the next three or four years.