21st Century Fox is prepared to offer shareholders of Time
Warner Inc. board representation as part of its bid to acquire the
media company, according to a person familiar with the matter.
Fox, which made a roughly $80 billion cash-and-stock offer that
Time Warner rejected earlier this month, believes that giving Time
Warner shareholders a voice on the board of the combined company
would make the deal more appealing, the person said. It isn't clear
how many seats Fox would offer.
The family of 21st Century Fox Chairman Rupert Murdoch has
effective control of the company through a roughly 39% voting
stake. The stock Fox offered for Time Warner was non-voting shares,
which people close to Time Warner have cited as one of the reasons
it rejected the bid, along with the price. Time Warner is concerned
that its shareholders would have little to no say over how a
combined company would be run despite owning roughly 40% of it, the
people say.
A person familiar with Time Warner's thinking said the offer of
board seats would make no difference in the Time Warner board's
deliberations, given Mr. Murdoch's control of the company and the
limited role of Fox's board. The person described the proposal of
board seats as a "cosmetic" move.
Mr. Murdoch made a similar offer of board seats when his News
Corp acquired Dow Jones & Co., publisher of The Wall Street
Journal, in 2007. A member of the Bancroft family, which used to
control Dow Jones, still sits on the board. (News Corp was split up
last year, with the company housing the entertainment assets taking
on the name 21st Century Fox and the company with the publishing
assets taking the News Corp name.)
Bloomberg earlier reported that Fox is open to giving Time
Warner shareholders board representation.
Despite the initial rejection by Time Warner, Fox is continuing
its pursuit. People familiar with the company's thinking say it
plans to be disciplined and is prepared to consider raising its
offer only to between $90 and $95 per share, from the original
offer pitched at $85 a share in a mix of 40% cash and 60% stock.
But that price range won't be enough to change the mind of Time
Warner directors, says a person familiar with Time Warner's
thinking.
If Fox were to bid too high and take on too much debt, it could
face the risk of a credit rating downgrade, some credit ratings
agencies have said. Fox wants to protect its investment grade
rating, people familiar with Fox's thinking have said.
Fox will get some added financial flexibility through a proposed
sale of satellite-TV holdings in Europe that is expected to net
after-tax proceeds of $7.2 billion. Fox also could bring in between
$6 billion and $10 billion from selling off news channel CNN under
its proposed offer, analysts say, and it is lining up a $25 billion
line of credit.
In part to allay concerns from some investors, Fox last week
promised to authorize a new share-buyback plan.
As the takeover saga plays out, much will depend on how the two
companies perform. People close to both companies have played up
the risks in the other's operations. Both Fox and Time Warner
report earnings on Aug. 6.
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