Twenty-First Century Fox Inc. (FOXA) is willing to pay more than $75 billion for Time Warner Inc. (TWX), according to people with knowledge of the matter, a sign Rupert Murdoch is undeterred after being rebuffed in an initial offer for the media company. Time Warner shares soared.
Fox’s willingness to raise its offer higher than $85 a share is contingent on Time Warner engaging in talks and opening its books to Fox, according to one of the people, who said Murdoch hasn’t been directly involved in discussions. A deal would reshape the media industry by giving the TV-and-film companies bargaining power in negotiations with cable operators such as Comcast Corp. and Time Warner Cable Inc., which are in the process of their own merger.
Fox calculates the combined company could achieve more than $1 billion in cost savings, including through the elimination of overlapping back office, human resources, sales and information technology operations, said one of the people, who asked not to be identified because the information is private. Fox estimates that figure could go higher once it’s able to conduct due diligence on Time Warner, the person said.
“Having more cable networks would give them more negotiating leverage with distributors.” said Brett Harriss, an analyst at Gabelli & Co. in Rye, New York. “They get the Ebitda, they get the cash flow and business, they take billions of dollars of synergies,” he said, referring to earnings before interest, tax, depreciation and amortization.
Source: Bloomberg | Jeffrey McCracken