Time Warner Inc (NYSE:TWX) is apparently so concerned about a takeover by Twenty-First Century Fox (NASDAQ:FOXA) that it’s taking desperate measures. Regulatory filings show that the media company has amended its bylaws to keep shareholders from forcing a vote on the offer.
Time Warner shareholders can’t call a meeting
The amendment goes into effect immediately. Previously, Time Warner’s bylaws had said that 15% of its shareholders could vote to call a special meeting. If shareholders decided to do that, they could have called one to talk about the bid from Twenty-First Century Fox, possibly as early as February 2015. Thanks to the change in the company’s bylaws, shareholders are now unable to call a meeting to force a vote on the offer until next summer, which is when Time Warner is scheduled to hold its next annual meeting.
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Business Insider cites an unnamed source who said Time Warner is trying to get Fox to pay more than what Fox’s Rupert Murdoch has already offered.
What Time Warner gains with the amendment
By changing the bylaws, Time Warner’s board gets more leverage for negotiating a higher price. In addition, shareholders of both companies have additional time to consider the merger. It’s expected that Time Warner will offer more information about its plan over the next few months.
In addition, the company gets more company to improve its operating performance, thus increasing its value. And on the flip side, there’s extra time for Twenty-First Century Fox to reduce the value of its shares by disappointing investors. Business Insider’s source said Fox’s management tends to overpromise and under-deliver, thus making the final point more likely. If the company’s shares decline in value, then it will be more difficult for it to strike a deal to buy Time Warner.
Fox must raise its offer
So now the ball is pretty much in Time Warner management’s court. Murdoch is probably going to have to offer enough to convince them that a buyout is in the company’s best interest. His previous offer was approximately $75 billion. Bloomberg reports that its sources say Murdoch is indeed open to increasing his bid, so that number has the potential to go higher.
Time Warner added that it plans to put the special meeting provision back in place at its next annual meeting in June 2015. If Murdoch wanted to wait until next year, shareholders could try to vote out all 12 members of Time Warner’s board. However, the company could amend its bylaws further to stagger the terms of its board members, allowing for just a minority of them to be up for re-election each year and thus making it more difficult for shareholders to vote a takeover through.