Time Warner Inc.’s (NYSE: TWX) earnings and its forecast disappointed Wall Street. Its shares tumbled 5% to $60 after it posted its fourth-quarter and full-year figures, and briefly it hit a new 52-week low of $55.53 during the day. In July 2014, Rupert Murdoch’s Twenty-First Century Fox Inc. (NASDAQ: FOXA) offered roughly $85 a share. Time Warner CEO Jeffrey Bewkes and his board rejected the offer, saying they could drive the price much higher.
Murdoch’s offer was 60% in stock and 40% in cash. He argued a marriage of the two companies would save $1 billion. Based on the overlap of the businesses of Fox and Time Warner, the figure probably had merit.
Time Warner’s specific answer to the Murdoch plan:
The Time Warner Board, after consultation with its financial and legal advisors, determined that it was not in the best interests of Time Warner or its stockholders to accept the Proposal or to pursue any discussions with Twenty-First Century Fox. The Board is confident that continuing to execute its strategic plan will create significantly more value for the Company and its stockholders and is superior to any proposal that Twenty-First Century Fox is in a position to offer.
That turned out to be entirely incorrect, as Time Warner’s fortunes have plateaued. For the full year 2015, revenue was $28.1 billion, up from $27.4 billion the year before. It missed the consensus analyst revenue forecast. Net income was flat at $3.8 billion. Investors were particularly worried about the effect of cord cutting on current and future results. The company did repurchase 45 million shares for $3.6 billion, an activity frowned upon by many investors as a waste of capital.
Bewkes had the chance to do the right thing for investors. Instead he has decided to preside over a business in a decline he cannot reverse.
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