Time Warner Inc (NYSE:TWX) apparently rejected the latest $85 per share offer from Rupert Murdoch’s Twenty-First Century Fox Inc (NASDAQ:FOXA), and investors couldn’t be more happy. That rejection is now fueling speculation that Time Warner will indeed be bought out by someone eventually, perhaps even Apple Inc. (NASDAQ:AAPL) or Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG).
Time Warner, the cable company
Re/code‘s Peter Kafka notes that Time Warner is first and foremost a cable company, which means an $80 billion bet like the one made by Murdoch is a big deal. The company owns two large cable companies and a large movie studio. Financial records show that the movie studio, Warner Bros. made up 45% of the parent company’s revenue.
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However, 70% of Time Warner’s operating income in the last quarter comes from the company’s two pay TV networks, HBO and Turner. And then there’s the fact that some of Warner Bros.’ profits come from TV as well because of the TV shows it makes in addition to movies.
Who will want Time Warner?
He thinks that some buyers, possibly from India or China, could be especially interested in Warner Bros. He believes Murdoch will bid on time Warner again even though he said that they aren’t currently in negotiations with the company. After all, his main goal is to get bigger to compete against other rapidly growing cable companies like Comcast Corporation (NASDAQ:CMSCA) (NASDAQ:CMCSK).
Kafka adds that others who are already in the pay TV business might want Time Warner, but not many of them could make a bid as sizeable as Murdoch can. He suggests perhaps The Walt Disney Company (NYSE:DIS) might be a possibility or potentially Viacom, Inc. (NASDAQ:VIAB), although he sees the latter as being less likely.
Next he turns his attention to Apple and Google, which he says have been looking at the pay TV business for a number of years. He suggests that since they can’t beat these companies, they might as well join them.
Apple, for instance, never would have bought Time Warner before, but he says the Beats Electronics acquisition changed that because it also wasn’t something the company would have done in the past. The $3 billion Apple plunked down for Beats was pocket change for the company, so much so that it didn’t even have to file a document with the Securities and Exchange Commission.
What about Google?
When it comes to Google, he notes that co-founder Larry Page usually isn’t interested in buying and selling content rights—unless it’s owning a total set of rights. The search giant considered bidding for the NFL’s Sunday Ticket package last year, and Page inquired why they couldn’t buy all the rights to all of the sports organization’s games.
And he’s not the only one who thinks Google might make a logical bidder for Time Warner. Variety reports that Vogel Capital Management CEO Hal Vogel thinks it would offer diversification for Google as well as “a reach into the content and consumer products business.” He said it’s “just duplicative” for Murdoch.
The way Time Warner rejected Murdoch’s bid was essentially an invitation for others to bid. So it seems now that the pay TV company is basically up on the auction block, informally anyway. It will be interesting to see who comes forward.