Time Warner CEO Jeff Bewkes just won an indirect endorsement for his argument that his shareholders would be better off letting him lead the company instead of accepting a cash and stock offer from Rupert Murdoch. Without a deal, Time Warner shares should hit $95 within a year, and there’s “a credible stand-alone bull case valuation of $105,” Morgan Stanley Research’s Benjamin Swinburne says today. The numbers are important: Time Warner rejected Murdoch’s $85 a share bid, and many analysts say that he could go as high as $105 before choking on the cost. That probably wouldn’t impress shareholders if they believe that they’ll see that price without the risk that would come with such a big deal.
Swinburne’s analysis begins by accepting Bewkes’ forecast that cable and satellite company payments to Time Warner’s Turner networks will grow at double digit rates each year over the next five years. “Given 7 out of the top 10 distributors have already renewed (as of early ’14), we see limited downside risk to [the] guidance,” the analyst says. Those payments now account for 20% of Time Warner revenues.
HBO also could grow subscriptions and revenues by tinkering with its pricing and deals with pay TV distributors. It has about 30M domestic subscribers, but the below-average penetration rates at Time Warner Cable and Dish Network suggest that there are “key opportunities for HBO to drive further revenue-generating subscriber growth.” Along that line, Bloomberg reported today that HBO is considering expanding a test with Comcast, introduced last year, that offers broadband service, basic TV, and HBO … Read More »
The risks of a deal are becoming more apparent as 21st Century Fox CEO Rupert Murdoch prepares to sweeten the $80B offer that Time Warner rejected, MoffettNathanson Research’s Michael Nathanson observes in a thought-provoking report this morning. With memories of the AOL Time Warner debacle still fresh in their minds, Time Warner execs won’t accept a non-cash bid “unless it is wildly generous,” the analyst says. He hopes Fox draws the line at $100 a share, up from $85, but notes that Murdoch could go to $105 without losing his company’s investment-grade debt rating. Yet if he prevails at that price, then Fox would have little margin for error. And Nathanson warns that mega-mergers “are more complicated than the simplicity of adding two Excel spreadsheet models together.”
The bottom line is that Fox’s stock “is in purgatory”as long as Murdoch’s interest in Time Warner remains alive. And the legendary dealmaker may not be able to pull it off. “After initially believing that this deal gets done at $100 per share, we have our doubts that it will be done at all,” Nathanson says. Among his concerns:
What’s up with Chase Carey? The Fox COO is highly regarded on the Street, but his contract expires in mid-2016. Some shareholders “are nervous that this deal — and the value of [Fox's] stock — will fall short of expectations if Chase was to leave.” Read More »
With the power of fans growing and the influence of TV reviews declining in the age of social media, the once marque summer TCA press tour has been taking a back seat to Comic-Con. Once again, the Los Angeles critics convention served as a warm-up for the San Diego geekfest, with the networks trying to save their noisy announcements for the Con. But what would’ve been another uneventful summer TCA was livened up by two big consolidation stories that broke in the first and second week — 21st Century Fox’s decision to put both the broadcast network and 20th Century Fox TV under the studio’s chairmen and CEOs Dana Walden and Gary Newman, and the company’s (for now unsuccessful) bid to acquire Time Warner.
The first news, which had been widely expected, was met largely with approval as an inevitable move in an industry where owning content is becoming more and more important. CBS has helped grow CSI into a billion-dollar franchise for the parent company, which owns the show. Compare that with The Big Bang Theory, which CBS developed and nurtured to a blockbuster hit that would make as much as $3 billion — for another company, Warner Bros. TV. Watching how much money it has made for WBTV, with the Chuck Lorre series, and for 20th Century Fox TV, with How I Met Your Mother, the network focused on growing its own syndicatable comedies, recently renewing CBS Studios-produced The Millers for a second season. During CBS’ TCA executive session, chairman Tassler was asked whether ownership played a role in the decision to renew The Millers over two 20th TV freshmen, The Crazy Ones, which drew bigger DVR ratings increases, and Friends with Better Lives, which showed better retention. “We will never ever, ever discriminate based solely on ownership,” Tassler said. “We feel that The Millers has a lot of great story material still imbedded in the DNA of the show.” Read More »
As expected, BSkyB said this morning that it will create “a world-class multinational pay TV business” with the acquisition of 100% of Sky Italia and 57.4% of Sky Deutschland. The UK’s leading pay-TV player has acquired the stakes from Rupert Murdoch‘s 21st Century Fox in a deal worth about £4.9B ($8.3B) in cash, plus assets. (Fox owns and will retain a 39% stake in BSkyB.) The combined group will have 20M subscribers in Europe across three of the four biggest markets. BSkyB will pay £2.07B for Sky Italia and £2.9B for Deutschland. It will also transfer its 21% ownership of National Geographic Channel to Fox at a value of £382M ($649M). That will raise Fox’s stake in the channel to 73%. BSkyB says it will also launch a voluntary cash offer to the remaining shareholders of Sky Deutschland at 6.75 euros ($9) per share. Subject to the number of shareholders who accept the offer, the overall cash value of the deals announced today could reach £7B ($11.9B). The moves come as BSkyB reported adjusted revenue for the year was up 7% to £7.6B ($2.9B).
The moves to create Sky Europe also come as Fox pursues a mega-acquisition of Time Warner. While speculation has been that the deal to combine the Skys was designed to raise funds for another eventual run at TW, it’s also considered that this deal has a distinct raison d’être and exists on its own … Read More »
Time Warner CEO Jeff Bewkes has a problem. Fox CEO Rupert Murdoch is preparing to sweeten his offer for the owner of Warner Bros, CNN, and HBO after it rejected an $80B cash-and-stock proposal last month. And Bewkes, who says he wants to keep Time Warner independent, has few takeover defenses. What can he do? Here are a few of the leading options that Time Warner execs and their advisors at Citigroup are weighing.
Combine with CBS: This would make Time Warner toxic for Fox: The FCC would not allow Murdoch to control two of the four biggest networks, and two of the largest TV station groups with overlaps in the nation’s largest markets.
And the business logic of a Time Warner-CBS combination is compelling. CBS chief Les Moonves would like to diversify his company to make it less dependent on domestic TV advertising. (He has already said that he’d like to buy CNN if Fox prevails with Time Warner and puts the news channel on the block.) Moonves also has made it clear that he’d like to play a bigger role in movies — his CBS Films appears to be struggling to figure out its identity. CBS could address these concerns by blending with Time Warner’s cable channels and movie studio.
The chief obstacle is that CBS is controlled by Sumner Redstone, who also owns Viacom. He hasn’t wanted to give up either property, and some bankers believe he’d prefer to … Read More »
When BSkyB reports its full-year results tomorrow, it is expected to announce a deal to acquire 57% of Sky Deutschland and 100% of Sky Italia from 21st Century Fox. Speculation has swirled that this deal is near since it emerged that Rupert Murdoch’s behemoth had bid $80B bid for Time Warner. In May, UK pay-TV giant BSkyB confirmed it had initiated preliminary discussions with Fox to evaluate a potential acquisition of the latter’s pay-TV assets in Germany and Italy. Fox also owns 39.1% of BSkyB. A combination of the businesses would have about 20M subscribers, and could also provide a payday to Fox of an estimated $13B. I’ve been cautioned that these funds are not necessary for Fox to be able to up its bid for TW, but it would put extra money in the coffers while creating a huge pan-European group. “It could just be that 21st Century Fox sees it as a useful way of generating funds and eases management time to concentrate on other things. But the reason for doing it would exist on its own merits,” Enders Analysis’ Toby Syfret tells me. It’s worth remembering that English Premier League soccer rights are coming to auction again in 2015 and extra cash could certainly come in handy. Read More »
Cowen and Co’s Doug Creutz advises investors today to “call a ‘time out’” on Big Media stocks in a break with the prevailing view on Wall Street that an upcoming round of mergers could help companies, or at least not hurt them. He fears that Fox’s bid for Time Warner will lead to “a land grab for content assets.” And companies that need cash for acquisitions probably won’t continue to repurchase shares and pay big dividends — strategies that have helped to keep investors interested in traditional media. The analyst says he now takes a ”more negative view” of Big Media, and downgraded Fox (to underperform from outperform), Viacom, and Time Warner (both to market perform from outperform). “Historically, this group has been uninvestable when M&A activity has been significant.”
Creutz observes that when Fox CEO Rupert Murdoch has had dealmaking on his mind “the shares of his company have underperformed the market.” And the analyst says he’s “not a believer that a combination with Time Warner would create significant value.”
It’s too risky to bet on traditional media, Creutz says, especially at a time when their stock prices are “near multi-year highs.” The advertising slow down in Q2 “feels like it was a little worse” than previous soft patches. It could become “a more significant negative” if the economy weakens. The pay TV cash cow could be threatened as “new over the top [Internet] distribution appears to be opening the door for insurgent content providers to potentially take market share.” And Creutz notes that the “dismal” … Read More »
“Fox and Warner are both pretty powerful companies today. … I don’t know how it changes much if they come together,” Netflix Chief Content Officer Ted Sarandos told analysts today when asked about Rupert Murdoch’s bid for the entertainment giant. The effort probably has “more to do with cable negotiations with sports.” CEO Reed Hastings added that he would offer “no speculation” about what Netflix might do if Fox and Time Warner agreed to merge. “The more we work directly with producers, the less we have to worry with aggregation and big content suppliers.”
Media Merger Mania: Fox’s Bid For Time Warner Is Just The Beginning
Time Warner Shares Soar On Reports Of $80B Offer By Rupert Murdoch
On other matters: Sarandos talked up Chelsea Handler’s upcoming late-night talk show, saying her focus on entertainment and pop culture will make it “a great representative of the kind of programming on Netflix.” A nightly show makes sense for a company known for binge viewing because viewers are “not watching late-night talk shows the way they used to. They’re watching days weeks and sometimes months later.” The show ”is not instantly perishable content. It’s more perishable, but the economics level that out for us.”
Related: Netflix Touts ‘Orange Is The New Black’ As Q2 Earnings Meet Expectations
Sarandos also says that Netflix will premiere the upcoming AMC series Better Call Saul outside of North America. He talked up the … Read More »
This is the first concrete sign that Time Warner is determined to fight Fox CEO Rupert Murdoch if he decides to do an end run around the board in an effort to acquire the company. Directors adopted an amendment to TW’s by-laws, which took effect immediately, that makes it harder for a small group of shareholders to call a special meeting, Time Warner says in an SEC filing. Previously investors holding at least 15% of the total votes could demand a meeting. The change limits that right to “the Chief Executive Officer or a majority of the entire Board.” The fear was that Murdoch — or anyone — could have tried to stampede short-term investors into accepting a deal even if the board concluded that it would not serve their long-term interests.
Related: Bart & Fleming: Fox-TW Mania Means Banker Fees And Layoffs, Not Quality
Time Warner shares are down 1.6% in post-market trading following disclosure of the change. The company says that it intends to restore the 15% threshold at the 2015 annual meeting.
Related: Will Anyone Besides Rupert Murdoch Take A Run At TW?
It’s a foregone conclusion now that something big will happen with Time Warner. Its stock wouldn’t be up 20% since yesterday morning — when Fox CEO Rupert Murdoch‘s $80B June offer came to light – if investors thought that Time Warner’s rejection of it was the last word on the matter. Indeed, the stock closed today at $86.12, which means a lot of people are betting that Fox or someone else will top the $85 a share stock-and-cash proposal that Time Warner shunned.
But here’s the problem: Some of Wall Street’s top analysts don’t know who has the desire and wherewithal to wage a bidding war with Fox. If Time Warner seriously wants to escape Murdoch’s embrace, it might have to make a deal of its own — perhaps to buy CBS. Even if it did, “Time Warner would still have to make the argument that more value would be created by merging with CBS than by accepting Fox’s tender offer,” Bernstein Research’s Todd Juenger says.
What about other usual suspects who might covet Time Warner? Comcast and AT&T are out of the running as they pursue their acquisition deals with, respectively, Time Warner Cable and DirecTV. Here are others that might conceivably kick the tires:
Disney: Hard to find anyone who thinks the company will jump in. Disney doesn’t need a big deal, especially with a “clear strategy that should play out over the last two years of Bob Iger’s contract,” MoffettNathanson Research’s Michael Nathanson says. The CEO likes properties that appeal to targeted audiences that he can coax to attend Disney … Read More »
Time Warner Rejects Rupert Murdoch's $80B Offer
Deadline's David Lieberman weighs in on Time Warner's rejection of Rupert Murdoch's $80B Offer to buy the media giant and where things go from here.
Media Merger Mania: Fox’s Bid For Time Warner Is Just The Beginning
Time Warner Shares Soar On Reports Of $80B Offer By Rupert Murdoch
Morning Report, Wednesday July 16
Reports that Rupert Murdoch's 21st Century Fox was kicking the tires on merging with Time Warner merger sends TW stock soaring; Ron Howard to direct a Beatles docu about their 1960s rise; TV production in LA took a massive jump in Q2 2014. Dominic Patten reports.
Time Warner Shares Soar On Reports Of $80B Offer By Rupert Murdoch
Ron Howard To Helm Authorized Beatles Docu On British Invasion Years
FilmLA: TV Production Soars In Q2 As Features Stay Steady With 2013
Rupert Murdoch’s $80B offer for Time Warner makes two things clear: The much anticipated round of content company merger mania is here — and likely will include Time Warner even though it rejected the proposal from Murdoch’s 21st Century Fox. And virtually no deal idea is too big or outlandish. One major question at this point is whether a large digital company such as Google will seize the opportunity to buy a major content company. Giants such as Fox and Time Warner want to defend the pay TV status quo — the lucrative bundle that requires subscribers to buy channels they don’t watch. If they become more powerful, then it could slow efforts by Internet companies to claim a piece of the giant ad pie that goes to TV.
Content company stock prices today reflect their new popularity. In addition to Time Warner (+15.6% at mid-day) we see Discovery +6.6%, Viacom +4.3%, Lionsgate +3.7%, AMC Networks +3.4%, and Scripps Networks +3.4%. “The urgency to find a ‘dance partner” will increase across the sector,” Bernstein Research’s Todd Juenger says. “Nobody wants to be the company that gets left out of the consolidation wave, and companies would rather control their own destinies.” What’s more, every investment banker in the world now smells opportunities to collect millions in fees if they can propose and facilitate deals.
Time Warner has two things that make it especially attractive. Read More »
UPDATE. 6:46 AM: Time Warner confirms that it rejected 21st Century Fox‘s acquisition offer saying its board concluded that remaining independent “will create significantly more value for the Company and its stockholders and is superior to any proposal that Twenty-First Century Fox is in a position to offer.” Fox said it would pay $32.42 in cash plus 1.531 of its own non-voting shares for each Time Warner share. Directors don’t like the plan, in part because it involves “significant risk and uncertainty as to the valuation of Twenty-First Century Fox’s non-voting stock and Twenty-First Century Fox’s ability to govern and manage a combination of the size and scale of Twenty-First Century Fox and Time Warner.” The board also notes that there would be “considerable strategic, operational, and regulatory risks” to a deal.
PREVIOUS, 4:39 AM: Time Warner’s up nearly 20% in pre-market trading after The New York Times and CNBC reported that the media giant recently rejected an $80B takeover proposal by Rupert Murdoch‘s 21st Century Fox. The bid could “put Time Warner in play and might again ignite a reshaping of the media industry,” the Times says. Fox COO Chase Carey met with Time Warner chief Jeff Bewkes in early June offering $85 a share — 40% of it in cash — a 25% premium at the time. The proposal said that the combined companies could save at least $1B by eliminating duplication. Fox, which owns Fox News, offered to sell CNN to avoid antitrust problems, and indicated that it would maintain Time Warner’s studio and cable network operations, as well as most of its best execs, according to the reports. The Time Warner board seriously considered the proposal but rejected it, in part because the offer included nonvoting shares. Nonetheless, “Rupert Murdoch is ‘determined’ to buy Time Warner,” CNBC reports, citing unnamed sources. Murdoch is said to have enlisted Goldman Sachs and Centerview Partners to advise him while Time Warner has Citigroup.
Fox says that it “can confirm that we made a formal proposal to Time Warner last month to combine the two companies. The Time Warner Board of Directors declined to pursue our proposal. We are not currently in any discussions with Time Warner.” Read More »
21st Century Fox just announced a long-rumored restructuring, which will see 20th Century Fox TV chairmen and CEOs Dana Walden and Gary Newman overseeing a new business unit within Fox Networks Group, Fox Television Group, which will combine Fox Broadcasting Co. and 20th TV. The two will assume their new expanded duties later this month, reporting to Peter Rice, Chairman of Fox Networks Group. The appointment fills a void at the top of the network left by the departure of chairman Kevin Reilly in May. (Walden and Newman had previously reported to Chase Carey, president and chief operating officer of 21st Century Fox, as 20th TV was not part of the Fox Networks Group, while Reilly had reported to Rice.) The move reverts to a structure from a decade ago when Fox and 20th TV too were part of the same unit, Fox Television Entertainment Group, run by Sandy Grushow.
In their new roles as chairmen and CEOs of Fox Television Group, Newman and Walden will be responsible for most facets of running Fox including programming, digital and marketing, with only ad sales and affiliate relations not under their purview. They also will continue oversight of 20th TV, which they have led for the past 15 years. “As we look to the future of the broadcast television business, it is clear that the best path forward is to operate our creative and broadcast divisions under the leadership of a single team, and that Gary and Dana are the perfect executives to take on this new role,” said Carey. “While TCFTV and FBC will each continue as an open supplier and an open network, respectively, the closer alignment of these two properties, coupled with a unified vision from Dana and Gary, gives us a clear advantage in creating even more hit content that will benefit both businesses.”
As news of Walden and Newman’s expanded responsibilities started to trickle down over the past few days, the reaction from industry types has been positive as many praised the duo’s work at 20th TV. Whether it has a good selling season or a not-so-good one, it is a very well-run studio, observers say. However, there was some trepidation among rival networks that they may no longer have access to 20th TV’s best projects, which could be steered to Fox, a network in dire need of a ratings turnaround. Walden and Newman moved in swiftly to assuage possible concerns with an internal memo this morning, in which they vowed no preferential treatment for 20th TV-produced shows at Fox and stressed that 20th TV will continue to sell to everyone. Read More »
This won’t go over well with the media moguls hobnobbing at the Allen & Co retreat in Sun Valley. But it’s the thesis behind the “neutral” rating that Barclays Capital’s Kannan Venkateshwar assigns to Big Media in his smart new 100-plus-page inaugural report on the industry. The major players – CBS, Discovery, Time Warner, Fox, Viacom, and Disney — make most of their profits from television. And although revenues in the field have grown over the last five years, “the source of this growth in most cases (with a few notable exceptions) has been through price inflation and an increase in the advertising inventory rather than a more sustainable growth in ratings,” he says. That spells trouble as Netflix, Amazon and others also produce content for the Web, and pay TV distributors including Comcast and DirecTV strike merger deals that make them stronger. They focus on shows and search engines — not networks and schedules. And as they forge stronger ties with subscribers, “traditional media companies get pushed further back into the value chain, further away from a direct relationship with the consumer.”
Read More »
Reality Check is a Deadline feature series covering the players, programs and trends in reality television.
In mid-May, 21st Century Fox surprised industry watchers when it announced its intent to form a joint venture with Apollo Global Management that would include the Shine Group, Endemol and CORE Media Group. Apollo had been known to be contemplating a tie-up of Big Brother producer Endemol and American Idol parent CORE Media, but the Shine element was new. What was unsurprising was this further move towards consolidation in the TV production sector which has seen myriad companies – big and small — acquired by the likes of Discovery, Warner Bros, ITV, Sony and Red Arrow to name a few, in the past year and a half. Folks caution that it’s still early days for a potential combined Shine-Endemol-Core, but that the desire is there to see such a deal come to fruition. If it does, it will create a so-called Mega Indie that would be one of the world’s biggest independent production companies working across both scripted and non-scripted. 21st Century Fox and funds managed by affiliates of Apollo would co-own and manage the new joint venture. Read More »
21st Century Fox Co-COO James Murdoch recently told investors that about half of his studio’s cash flow comes from television series. “There’s maybe one other firm that can claim the same volume and success” that Fox has had in TV, he said at the Sanford C Bernstein Strategic Decisions Conference in May. The increasingly visible Murdoch will further discuss Fox and its plans for the TV business when he delivers the Media Mastermind Keynote at October’s Mipcom. Murdoch was upped to his current role at Fox in March, in a clear indication that dad Rupert is putting his succession plans in order, and has been appearing publicly with far more frequency over the past year. He now has direct responsibility for 21st Century Fox’s TV interests, which include the Fox Networks Group in the U.S. and, internationally, holdings in BSkyB, Sky Deutschland, Sky Italia and STAR India. It’s a particularly interesting time for the European holdings as BSkyB in May confirmed it had initiated preliminary discussions with 21st Century Fox to evaluate the potential acquisition of its pay-TV assets in Germany and Italy. Meanwhile, Fox has also said it is looking to form a joint venture with Apollo Global Management which would combine the Shine Group, Endemol and CORE Media Group. Mipcom runs from October … Read More »
Here’s the agreement that the 21st Century Fox COO said last month that he had tentatively reached with CEO Rupert Murdoch. The terms, formalized today, will keep Chase Carey at the company through June 30, 2016 — although he can terminate on December 31, 2015 if he gives the company six months notice. If he leaves then he must provide “non-exclusive consulting services” subject to a non-compete provision to the end of June 2016, the company says in an SEC filing. His previous contract, from 2010, was set to expire at the end of this month. Just about everything else in Carey’s employment terms remains unchanged; he made $27M in the fiscal year that ended in the middle of 2013. Today’s announcement should please Wall Street: Carey’s popular among investors and has become Fox’s public face as Murdoch has withdrawn from many corporate events, including its quarterly update call with analysts.
Some became concerned about Carey’s fate in late March when Fox announced that James Murdoch had been promoted to co-COO, while another of Rupert’s sons, Lachlan, was named Non-Executive Co-Chairman. Fox Networks Group now reports directly to James. He also has “direct responsibility for the strategic and operational development” of Fox’s pay TV interests in Europe and Asia, reporting to Carey.