Rupert Murdoch's21st Century Fox has scrapped its bid to take over Time Warner, a move that would have created a media behemoth and was widely seen as the crowning deal of Murdoch's career.
The company announced last night that it was withdrawing the $80bn (pounds 47bn) bid after Time Warner "refused to engage with us". Fox said it would instead buy back $6bn of its own shares. It made the announcement as US stock markets were closing and a day ahead of releasing its latest quarterly results.
"We viewed a combination with Time Warner as a unique opportunity to bring together two great companies, each with celebrated content and brands. Our proposal had significant strategic merit and compelling financial rationale and our approach had always been friendly," Murdoch said in a statement.
"However, Time Warner management and its board refused to engage with us to explore an offer which was highly compelling. Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders."
He said these factors, "coupled with our commitment to be both disciplined in our approach to the combination and focused on delivering value for the Fox shareholders, has led us to withdraw our offer."
Fox made its unsolicited bid to Time Warner last month. The move was quickly rebuffed by Time Warner's chief executive officer, Jeff Bewkes, who argued it undervalued the company, whose assets include HBO, the Warner movie studio and CNN.
Bewkes cited Fox's dual-class share structure, which hands control to the Murdoch family even though they are minority shareholders, "regulatory risks" and the ability of Fox's management to govern a merged company of this size as factors for the rejection.
Analysts had speculated that Fox would have to pay as much as $100bn to secure a deal and that other players, including potentially Silicon Valley giants like Google and Apple, could become involved in a bidding war.
The bid was Murdoch's largest ever and comes after his reputation was muddied by the hacking scandal at his UK newspapers which led to the closure of his most profitable newspaper, the News of the World, and the conviction of senior staff.
Both Fox and Time Warner are due to release results today and had been expected to face questions from analysts about the state of the negotiations. Time Warner's share price fell more than 10% in after-hours trading on the news, while Fox's rose by more than 7%.
Richard Greenfield, a media analyst at BTIG, said that he was surprised by the withdrawal and that there had been "compelling logic" behind the deal. Some had argued that a combined entity would have had greater negotiating power with the ever larger cable companies. Comcast, the US's largest cable firm, is attempting to finalise a takeover of Time Warner Cable, the number two firm and once part of Time Warner.
"This put the ball firmly in Jeff Bewkes's court now," he said. "I think this is classic Murdoch gamesmanship. Murdoch is saying: 'OK, so you are not even going to entertain this bid. We have other options. Let's see how your shareholders like this.' I guess we'll know tomorrow."
The deal seemed personal for Murdoch, who had lined up a key position within the merged entity for his son James Murdoch, whose career seemed all but over at the height of the hacking scandal.
When the deal was announced, Claire Enders of the media research firm Enders Analysis said it would send James's career "into the stratosphere, not just because of its scale, but because it is the deal to seal his reputation for years to come".
The company now appears to have taken a leaf out of Bewkes's book. He has spent career at Time Warner selling assets and handing cash to shareholders rather than making the swashbuckling deals associated with moguls like Murdoch.
Rupert Murdoch had lined up a key position for his son James at the merged entity of Time Warner and 21st Century Fox