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Time Warner said Rupert Murdoch's $80 billion offer undervalued the media conglom

Rupert Murdoch’s 21st Century Fox confirmed that it made an offer to acquire Time Warner, but the media company said the offer was rejected and that there are no talks in progress. Time Warner also confirmed that it turned down the $80 billion bid.

“21st Century Fox can confirm that we made a formal proposal to Time Warner last month to combine the two companies,” Fox said in a statement. “The Time Warner board of directors declined to pursue our proposal. We are not currently in any discussions with Time Warner.”

Fox made an unsolicited offer of $80 billion for Time Warner in June, the New York Times reported earlier Wednesday.

In a statement, Time Warner said Fox made an offer for all of the outstanding shares of the company for a combination of 1.531 of 21st Century Fox Class A non-voting common shares and $32.42 in cash per share. “The Time Warner Board, after consultation with its financial and legal advisers, determined that it was not in the best interests of Time Warner or its stockholders to accept the proposal or to pursue any discussions with Twenty-First Century Fox,” the conglom said.

Time Warner added that its board is “confident that continuing to execute its strategic plan will create significantly more value for the company and its stockholders and is superior to any proposal that Twenty-First Century Fox is in a position to offer.” Time Warner also said there are “considerable strategic, operational and regulatory risks to executing a combination with Twenty-First Century Fox.”

The combination of Fox and Time Warner would create a media powerhouse, with annual revenue of about $65 billion. It would bring under one roof assets that include movie studios 20th Century Fox and Warner Bros. and a portfolio of top-tier cable networks, including Fox News and FX, and Time Warner’s HBO, TNT and TBS, as well as Fox Broadcasting and its sports networks and each company’s international businesses.

Despite being rebuffed, Murdoch is “determined” to buy Time Warner and “is unlikely to walk away,” the New York Times reported, citing anonymous sources involved in the talks.

Big media companies have been exploring mergers and acquisitions, in large part to boost their leverage as pay-TV operators combine. Comcast is in the process of acquiring Time Warner Cable, and AT&T has bid for DirecTV.

News of the Fox-Time Warner talks should buoy all media stocks, Bernstein Research senior analyst Todd Juenger wrote in a research note. “The urgency to find a ‘dance partner’ will increase across the sector,” he wrote. “Nobody wants to be the company that gets left out of the consolidation wave, and companies would rather control their own destinies.”

At the Allen & Co. media conference in Sun Valley last week, Time Warner CEO Jeff Bewkes was asked about Fox’s rumored interest in acquiring the conglom, and he responded, “I know nothing about it.”

Fox first approached Time Warner in early June, then made a formal offer of $85 per share in cash and stock for the company later in the month, according to the Times report. Under the proposed deal, Fox had said that it would sell CNN to “head off potential antitrust concerns” since Fox News Channel competes directly with CNN, the Times reported. CNN has been seen as a potential target for CBS and ABC.

Both companies have recently separated their entertainment and publishing businesses. News Corp. last year spun off its publishing division (which retained the News Corp name) and renamed itself 21st Century Fox. Last month, Time Warner’s Time Inc. magazine split off as a separate, publicly traded company.

In the merger talks, Fox was advised by Goldman Sachs and Centerview Partners. Time Warner said Citigroup Global Markets is acting as financial adviser and Cravath, Swaine & Moore is acting as legal adviser.

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