For Time Warner shareholders, the magic number is 100.
Although CEO Jeff Bewkes was quick to shoot down an acquisition by Rupert Murdoch’s 21st Century Fox, Time Warner shareholders could easily be swayed with a bid around $100 a share, said sources close to the situation.
That would be 18 percent above Fox’s initial $85-a-share proposal, a mix of non-voting shares and cash. Time Warner investors are also hoping for more cash and Fox shares with voting rights, sources said.
“They need to sweeten it a little bit,” said one source close to talks. “Make it 60 percent cash and the rest in stock and mix in some Class B [voting] shares.”
Clearly, Time Warner investors believe that both media conglomerates are just biding their time.
Time Warner’s stock rose another 3.6 percent on Thursday, to close at $86.12, after jumping 17 percent the previous day when the rejected bid was leaked.
“The clock is ticking on Time Warner’s independence,” said Michael Nathanson, a media analyst at MoffettNathanson. “It’s not the final offer, but the leak created a higher-priced Time Warner.”
Nathanson said the expectation is that Fox will be back with another bid in the $90s. Neither company would comment.
The next step in the merger dance could happen Aug. 6, when both companies are set to report quarterly earnings with investors itching to hear more.
The two media giants will spend the next three to six months explaining their positions, said Nathanson.
No doubt Time Warner will continue to claim it’s better off as a stand-alone company, while Fox will talk about how well the two fit together.
One M&A specialist said both companies have factors working in their favor.
“Time Warner is in the catbird seat. The stock has performed well. There is no angry investor base,” this person said.
At the same time, Fox’s bid was well timed with other potential suitors, such as the telecom giants, pursuing other deals, the person added.
The overall M&A environment is also hungry for this kind of deal with the debt financing market red hot.
“The animal spirits are reinvigorated,” this person said.