Though rejected, a surprise bid by Rupert Murdoch's Fox for entertainment rival Time Warner underscores that large media companies are in the mood for major consolidation.
Time Warner Inc., which owns the Warner Bros. movie studio and TV channels such as TNT, TBS and HBO, said Wednesday that it rejected the deal and had no interest in further discussions. 21st Century Fox Inc., known for movies hits such as the "X-Men" franchise and "Dawn of the Planet of the Apes," confirmed last month's takeover bid and said the two companies aren't currently in talks.
The cash-and-stock offer, worth about $76 billion, comes on the heels of cable giant Comcast Corp.'s proposed $45 billion takeover of Time Warner Cable Inc., which was made in February and is undergoing regulatory review.
Media is going through a seismic change, as more and more people watch entertainment online, via Netflix, Hulu and services such as HBO Go, which Time Warner owns. Both distributors and producers of content have been struggling to adjust as the lines between TV and digital viewing blur. One way to do that is to get bigger.
"On the one hand you've got the TV and digital blur," said Ken Doctor, a media analyst for consulting company Outsell. "On the other hand you've got the quest for bigness to meet and accommodate and take advantage of that digital blur."
The offer included a portion of Fox's non-voting common stock and $32.42 in cash for each Time Warner share, Time Warner said. At Tuesday's closing prices, that is worth about $86.30 per Time Warner share, a 22 percent premium.
Time Warner said Wednesday that its board rejected the bid after determining that its own strategic plan was better for the company and its stockholders and "is superior to any proposal that 21st Century Fox is in a position to offer."
Time Warner also said a combination with Fox carried considerable strategic, operational and regulatory risks. It said there was uncertainty in the valuation of Fox's non-voting stock and its ability to handle a combination of this scale.
Janney analyst Tony Wible said that the deal would have made sense as cable and satellite TV operators start to combine.
Companies that own the cable systems, such as Comcast and Time Warner Cable, and companies that own the cable channels, such as Time Warner Inc. and Fox, have been increasingly clashing over fees. Channels have been demanding more money from cable TV providers for rights to include the channels in cable lineups. If the providers are able to increase their negotiating power by combining, channels could respond by doing the same.
"You can get more money negotiating together than you would separately," he said. "It's a chain reaction. There will be more consolidation on the content side in response to consolidation from cable and satellite companies."
Time Warner Inc. spun off Time Warner Cable into a separate company in 2009 and separated from its publishing division Time Inc. last month to focus on its faster-growing TV and movie business.
Murdoch's News Corp. also split into two companies last year: The newspaper and publishing portion, still called News Corp., and the more-profitable film-and-TV unit, 21st Century Fox Inc.
Shares of Time Warner jumped 16.4 percent, or $11.67 to $82.68 in midday trading. Shares of 21st Century Fox dipped $1.22, or 3.6 percent, to $32.93.
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