Time Warner stock surges after rebuffed Fox offer

Shares of Time Warner Inc. surged Wednesday after Rupert Murdoch’s 21st Century Fox said it had tried to buy the company in a deal valued at $80 billion.

Time Warner’s board rejected the overture, but the offer drove Time Warner stock up 16% to $82.53 in early trading on the New York Stock Exchange. The stock was even higher earlier in the day, touching $84.40 a share.

Fox’s stock was lower Wednesday. The company’s shares fell about 5.5% to $33.26.

A 21st Century Fox spokesman declined to comment on whether the company would continue to pursue Time Warner or any other big media acquisitions. But analysts think Murdoch will not be turned away so easily.

Analyst Michael Nathanson said that Fox will likely raise its bid for Time Warner to get a deal done. The confirmation of the long-rumored offer may even get companies in other industries to kick the tires on Time Warner as well.

Bernstein analyst Todd Juenger said that the offer and subsequent rejection will lead to a wave of consolidation in the media and entertainment industry, which should drive up the stock prices of companies in the sector.

Juenger named smaller companies such as AMC Networks Inc., Scripps Networks Interactive Inc. and Lions Gate Entertainment Corp. as potential acquisition targets. All three of those companies saw their stocks rise Wednesday morning.

“It is more about the sector than this specific deal,” he wrote in a note to clients. “The urgency to find a ‘dance partner’ will increase across the sector. Nobody wants to be the company that gets left out of the consolidation wave, and companies would rather control their own destinies.”

This follows other recent major deals in the cable and telecommunications industry. Comcast Corp. is in the process of acquiring Time Warner Cable and AT&T is buying satellite broadcaster DirecTV.

Nathanson noted in his report that one deal typically leads to another, or at least talks of further merger-making. This was the case in the recent cable and telecom consolidation.

“We would expect rumors that CBS and Viacom get together to heat up again,” Nathanson wrote. “We do not think Disney needs to make any significant deal given the company’s clear strategy that should play out over the last two years of Bob Iger’s contract.”

Shares of Discovery were up roughly 7% Wednesday. Viacom rose 4% while Disney’s stock was little-changed.

An earlier version of this post mistakenly attributed comments by analyst Michael Nathanson to analyst Craig Moffett.

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