Time Warner Holders Griffin, Gabelli Call Murdoch Offer Tempting

Wednesday, 16 Jul 2014 03:12 PM

 

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Two billionaire money managers who own shares in Time Warner Inc. said Rupert Murdoch’s bid for the media company will be hard to resist, particularly if he comes back with a higher offer.

Ken Griffin, chief executive officer of hedge-fund firm Citadel LLC, said the deal makes sense for the company’s shareholders, and Mario Gabelli, CEO of Gamco Investors Inc., called it “hard for a board to turn down.”

“It’s going to get tough to say no,” Griffin, 45, said in a keynote speech at the fourth annual CNBC Institutional Investor Delivering Alpha conference in New York today. “Murdoch has a history of being willing to go the extra mile to get deals done that are important to him.” Griffin’s $20 billion investment firm held stakes in both Twenty-First Century Fox Inc. and Time Warner as of March 31.

Murdoch’s Twenty-First Century Fox is willing to pay more than $85 a share for Time Warner, according to people with knowledge of the matter, a sign the company is undeterred after being rebuffed in an initial offer. A deal would reshape the media industry by giving the TV-and-film companies bargaining power in negotiations with cable operators such as Comcast Corp. and Time Warner Cable Inc., which are in the process of their own merger.

Time Warner Inc. soared 18 percent, the biggest gain in 14 years, to $83.87 at 2:38 p.m. in New York.

Gabelli, 72, a mutual-fund manager and longtime media investor, said a higher offer would value Time Warner at 14.5 to 15 times its earnings before interest, taxes, depreciation and amortization.

Cash Preference

A “15 multiple is not inconsistent,” he said in an interview today with Tom Keene and Michael McKee on Bloomberg Radio’s “Bloomberg Surveillance.”

Gabelli questioned whether the structure of the expected offer, a mix of cash and stock, might be an obstacle.

“My clients would prefer cash because we already own Fox,” he said.

Gabelli said his firm holds about 4 million shares in Time Warner and 10 million shares in Fox.

Fox estimates that the combined company could achieve more than $1 billion in cost savings, including through the elimination of overlapping back office, human resources, sales and information technology operations, according to the person, who asked not to be identified because the information is private.

“Rupert has this vision of the future 10 years from now and understands the notion that you can get a lot of costs out of these content companies,” said Gabelli, whose firm managed $47.6 billion as of March 31.

Chuck Freadhoff, a spokesman for Los Angeles-based Capital Group Cos., the largest Time Warner shareholder among money managers, said his firm declined to comment on a potential deal because it didn’t discuss individual holdings.

© Copyright 2014 Bloomberg News. All rights reserved.

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