Rupert Murdoch is hunting again. The New York Times reports that Time Warner recently rejected an $80 billion takeover offer by 21st Century Fox, the media and entertainment conglomerate run by the world’s most feared Australian. If it were ever to happen, the deal would give rise to a beastly television and film business, with HBO, FX, TNT, TBS, Fox, 20th Century Fox, and Warner Bros. all suddenly crowded under one roof. To avoid antitrust issues, Time Warner would probably need to sell CNN to a potential bidder such as ABC or CBS, since the cable channel competes directly with Fox News. It’d be a small concession in the grand scheme of things.
At Business Insider, Jay Yarow argues that this bid is a response to consolidation in the cable and Internet industry, amid Comcast’s attempt to buy Time Warner Cable and AT&T’s acquisition of DirecTV.* Combining 21st Century Fox’s and Time Warner’s cable properties, the thinking goes, would give the merged company enough heft to bargain against the shrinking number of providers.
That said, I don’t think this move is completely defensive. Fears about cord-cutters aside, TV is still a handsomely profitable business, and a mega-merger of this sort could easily make it even more profitable. According to the Times, 21st Century Fox executives think the proposed tie-up would create about a $1 billion cost savings between the two companies, primarily by “cutting sales staff and back-office functions.” There’s little reason to doubt that Murdoch and his team could find some efficiencies by firing people.
Beyond that, Murdoch is an empire builder, and a patient one. My guess is that, if he really desires Time Warner, he’ll eventually have it. It’s not as if Time Warner is controlled by a single, protective family as the Wall Street Journal was for many years—before Murdoch wooed the Bancrofts into selling. It is a normal public company, and as the Times notes, most of its shareholders already own stock in 21st Century Fox as well, so it seems unlikely that they’d object greatly to a management change. Meanwhile, 21st Century Fox is already offering Time Warner stockholders a reported 22 percent premium on their shares. If that’s the opening bid, at some point you might assume that the sheer volume of money being offered will pressure everybody into negotiating.
*Correction, July 16, 2014: This post originally misspelled DirecTV as DirectTV.
