Time Warner Stock Down Sharply After Fox Withdraws Bid

1:49 PM PST 08/05/2014 by Georg Szalai
Jeff Bewkes

UPDATED: Rupert Murdoch's company sees its shares rise in after-hours trading on the news and the announcement of a $6 billion stock buyback program.

Time Warner's stock dropped sharply in after-hours trading Tuesday after Rupert Murdoch's 21st Century Fox withdrew its takeover bid.  

The stock was down more than 11 percent as of 4:35 p.m. ET at $75.10. Analysts have said that the stock has found a new "floor" price after the $85 per share offer that Fox recently made, which Time Warner had rejected. It had recently set an all-time high of $88.13.

STORY Time Warner Stock Down After Fox Withdraws Bid

Fox's stock in Tuesday after-hours trading was up more than 7 percent at $33.30 at around the same time. That was near its 52-week high of $35.65, set in mid-June.

Analysts had said that the stock would remain in deal limbo as long as Murdoch pursued Time Warner.

Janney Montgomery Scott analyst Tony Wible, who had said a Fox-Time Warner deal would make sense before a bid was confirmed, said Tuesday that the Fox withdrawal may not be the last word between the two companies.

He told The Hollywood Reporter: "I think it is all part of the process and is a good way for Fox to boost its stock price while devaluing TW."

Stifel, Nicolaus analyst Drew Crum raised his price target on Time Warner's stock to $93 after the Fox bid. "The recent share price appreciation for TW has been propelled by an unsolicited bid," he wrote in a report. "We believe this shines a positive light on Time Warner's assets and changes the way in which the market views valuation, while effectively setting a floor."

Wunderlich Securities analyst Matthew Harrigan similarly said that if TW shows any operating weakness, Fox could return for another look. He added that the bid withdrawal would remind TW shareholders where the stock would be without a bid.

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‎Wells Fargo analyst Marci Ryvicker issued a brief note to investors after the news of the withdrawn bid.

"While we understand the rationale behind Fox's bid for TW, investor perception tended to be somewhat negative with concerns over 'empire building,' 'over-paying' for TW or Fox eventually buying 'something else' (which no one seemed to be able to specifically identify)," she wrote. "We also heard concerns about the longer-term growth profile and potential valuation of the combined company, given that Fox seemed to be a faster grower and traded at a higher multiple than standalone TW."

Concluded Ryvicker: "While we grew to like the Fox-TW combination, we have to admit some level of relief with Fox's press release, which confirms to us that the company remains disciplined, is dedicated to creating shareholder value, and is not 'empire building.' "

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

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