Klutzy Fox

Murdoch miscalculation points to Time Warner value

Rupert Murdoch miscalculated. The sly old fox of global media abruptly yanked his $80 billion offer to buy rival Time Warner on Tuesday after failing to anticipate his quarry's resolve and the price demands of investors. Twenty-First Century Fox shares rallied after the market had officially closed while Time Warner's retreated toward their pre-bid level. That means refusenik boss Jeff Bewkes has something more to prove.

The brief episode suggests the octogenarian Murdoch has lost a step. First, the Fox chief executive must have sensed during discussions that his counterpart was amenable to a combination, even if the original $85-a-share bid in cash and shares wasn't quite right. Instead, Bewkes and his board emphatically thumbed their noses at the offer, saying Time Warner's own plan was better than anything Fox could offer.

Murdoch also failed to appreciate how his own investors see him. In the weeks since the mid-July bid disclosure, Fox Class A stock has tumbled by 11 percent. For one thing, shareholders had grown accustomed to buybacks. They may well, of course, have understood the logic of putting the two companies together. Some of the value lost, though, probably stems from fear, based on historical precedent, that Murdoch would pay whatever was necessary to get his hands on the owner of HBO and the Warner Bros. studio. What's more, Murdoch was proffering his second-class shares, which don't allow its owners any say in how his entertainment conglomerate is run. While there is significant investor overlap in the two companies, there is also clear evidence they're broadly unhappy with Murdoch's dynastic ways. Though it counts for nothing, non-Murdochs voted last year to oust the CEO's sons, Lachlan and James, from the board. Murdoch underestimated the distaste for his non-voting stock.

And yet Murdoch can walk away looking like a disciplined buyer ready to repurchase more shares and with his stock back on the rise. Bewkes, on the other hand, faces a bigger challenge. Though Time Warner shareholders may have gotten too greedy, they will now expect the company to deliver soon at least what was on offer from the takeover. If Bewkes can't, Murdoch may yet turn out to be crazy like a fox.