You couldn’t afford it.
The message from the board of Time Warner to Rupert Murdoch was something to that effect after it rejected a US$85-per-share takeover bid by his 21st Century Fox media flagship.
It came in language that extolled Time Warner’s growth plan as being “superior to any proposal 21st Century Fox is in a position to offer”, Bloomberg reported Friday.
Time Warner concluded that Murdoch couldn’t afford anything above US$100 a share after evaluating Fox’s books, the report said, citing people familiar with the matter.
Any deal would need to be financed so heavily it could undermine Fox’s credit rating or involve so much stock investors could lose money.
So Time Warner let it be known it won’t even begin talks if the offer is less than US$100 per share based on future earnings. Fox is willing to sweeten the offer but it won’t go beyond US$90, according to a person familiar with Fox’s position.
Credit-rating agency Standard & Poor’s estimates that Murdoch, 83, can add cash to raise the offer to no more than US$93 a share without risking a downgrade to junk. The agency said it hasn’t set a limit on how high Murdoch can go to maintain investment grade.
Moody’s Investors Service, however, said Fox could go up to US$105 by borrowing US$21 billion while maintaining its investment grade rating.
The US$85-a-share cash-and-stock offer values New York-based Time Warner at about US$75 billion, excluding options that could raise the total equity value to US$80 billion. Each dollar per share that Murdoch raises his bid costs almost US$1 billion, according to Bloomberg.
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