Apple may be interested in gobbling up Time Warner or part of it if the latest round of rumors is true. On Tuesday, activist investor Carl Icahn denied taking an activist stake in Time Warner, saying he doesn’t “own a single share” of the entertainment company. Meanwhile rumors have been swirling, suggesting that he indeed holds a stake and is pushing for a sale or spinoff of some of its assets.
Now we have even more fuel for the fire.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge fund assets near $4 trillion, hedge funds slash their exposure to the big five tech companies, and Rokos Capital's worst-ever loss. Read More
Apple interested in Time Warner?
The New York Post reports that its sources claim the iPhone maker is one of a handful of potential suitors for the company. Other companies that are said to be interested in Time Warner are AT&T, which acquired DIRECTV last year, and Fox. The entertainment company rejected a bid of $85 per share from Twenty-First Century Fox a year and a half ago, and currently its shares are significantly lower than that, trading in the $70 range.
It seems Time Warner may have a target on its back, so to speak, as it lacks the dual-class shareholder structure its peers have. This makes it vulnerable to activist pressure.
Apple rumored to be planning TV service
If Apple really is interested in the company, its interest is likely related to the streaming TV service it has been rumored to be working on. The iPhone maker has reportedly been struggling to sign content deals with distributors as it attempts to build a small programming bundle. If it could get Time Warner on board in some way, Apple could get access the majority of what it needs to complete the bundle, reports the New York Post.
Among the content providers the iPhone maker needs to make a streaming TV bundle a success are CNN, Turner Sports and HBO (although Apple already does have a partnership with HBO for its over-the-top streaming service HBO Now). Time Warner would also bring Apple access to Warner Bros. content. According to the New York Post, top Apple executive Eddy Cue has been tracking the Time Warner story.
The media outlet also reports that CEO Jeff Bewkes is facing pressure, either from shareholders or possibly activists, to sell or spin off HBO. He reportedly held a number of closed-door meetings earlier this week, during which he explained that he opposes either option. However, the executive reportedly hinted that he might sell all of Time Warner.
Media outlets reported that Bewkes doesn’t think it makes sense to spin off HBO or Turner Broadcasting because scale is becoming increasingly important in the media industry. He believes a split could destroy value for shareholders in the same way Viacom has been struggling since it split up about ten years ago.
Should Apple buy Time Warner?
So if Bewkes really is open to selling Time Warner as a whole, should Apple bite? Fortune‘s Philip Elmer-DeWitt thinks it’s a good idea. Of course it’s not uncommon to hear rumors about Apple being interested in huge companies. The list of big names the iPhone maker was rumored to be interested in includes Tesla Motors, GoPro, Yahoo, Netflix and others.
However, Elmer-DeWitt writes, “This time feels different.
He finds the report of Apple being interested in Time Warner as being credible because it came from the New York Post, which is owned by News Corp. He suggests that someone from News Corp. could have attended the above-mentioned closed-door meetings with Bewkes. That would then result in a credible source from within the New York Post’s media family.
Further, he notes that Apple probably does need Time Warner or another similar company in order to make the streaming TV bundle it envisions become a reality. Video content providers will not share their content with just anyone. Traditional TV networks are trying to protect their livelihood, and access to their content probably won’t come cheap—unless, of course, Apple can bring some of the top content in-house by acquiring Time Warner. Live sports are potentially the most elusive and the priciest content to gain access to, and this problem would be handled with this acquisition.
Apple can certainly afford to purchase the massive entertainment company as it has over $200 billion in cash just sitting in the bank, Elmer-DeWitt notes. Granted, it would be a large acquisition for Apple as Time Warner has a market capitalization of $56.9 billion, which makes it out of the ordinary, but if the Cupertino, Calif.-based tech giant sees enough value in having a streaming TV service, it just might bite.
As of this writing, shares of Time Warner are up 0.01% at $71.10 per share, while Apple stock is up 0.24% at $100.20 per share.