Time Warner: Color on FOXA Bid Withdrawal
- Topeka Capital is downgrading TWX to Sell from Hold. Yesterday, after the close, Twenty-First Century Fox (FOXA) withdrew its initial bid to buy TWX, a bid that, based on yesterday's closing price of FOXA, valued TWX at $80.34/share. That said, with the stock only marked down 9.9% from yesterday's close, there is still an inefficient "in-play" premium built into TWX shares, which in firm's view, needs to be unwound. Tgt moves from $71 to $69.
- FBR Capital notes, as Fox trots away from its bid for Time Warner, citing the 11% decline in its stock and Time Warner's refusal to negotiate, firm sees a dimming of merger fever in content stocks. Not just for the Time Warner pairing. But the broader concept of a big consolidation wave among TV content suppliers. Consolidation is at times a follow-the-leader exercise. And the combination of two of the biggest players would have motivated other TV content companies to focus more on the need for mergers to gain scale, even though that argument was never part of Fox's case for Time Warner. Lacking that example, content companies will tend to shift back to business as usual.
- TWX reported earnings this morning and FOXA reports after the close.