Twenty-First Century Fox Inc (FOX) & Time Warner Inc (TWX): Turner’s Turnaround Might Keep Bids Away

Amol Sharma, deputy bureau chief of the Wall Street Journal, has said in a piece on Fox Business that Time Warner Inc (NYSE:TWX) needs to fix Turner Cable Networks in order stave off takeover bids from Twenty-First Century Fox Inc (NASDAQ:FOX). Sharma argues that 50% of the profits come from this side of the business, which had double digit operating income growth over the last five years and propelled the stock higher.

However, Turner’s ratings are beginning to slide, as the competition in the cable landscape is becoming fiercer day by day, with hit shows like AMC’s Breaking Bad and FX’s Sons of Anarchy scooping up lots of viewers. Finding a way how to compete in such an environment is key to keeping Time Warner Inc (NYSE:TWX) as a standalone company, Sharma says.

Time Warner Inc (NYSE:TWX) is currently in search for a CEO for its entertainment division after Steve Koonin, which served for fourteen years, left the company. Sharma says the company is trying to find “somebody new now, who could inject this youthful, edgy style of programming into the company.” So far, however, all reviewed candidates have not met this requirement. Nevertheless, the company is confident it will find the right fit in the next months.

The current Twenty-First Century Fox Inc (NASDAQ:FOX) offer for Time Warner Inc (NYSE:TWX) stands at $85-a-share or $18 billion and, as expected,  has been rejected by the company’s management. According to Mr. Sharma, to bring the management on the negotiating table, Twenty-First Century Fox needs to “sweeten” its offer to “north of $100.” Ultimately, he says, the decision is upon the shareholders, to either go with Twenty-First Century Fox Inc (NASDAQ:FOX) which offers a premium of around 20%, or to stay with CEO Jeffrey Bewkes who promises higher returns.

Should the deal materialize, Twenty-First Century Fox Inc (NASDAQ:FOX) will spin-off CNN, the popular but struggling news channel. Pundits argue that as a standalone company, it could reach a market valuation of between $6 billion and $10 billion.

Disclosure: none