Time Warner (TWX) CEO Jeff Bewkes has to sell to 21st Century Fox (FOXA) and its Chairman Rupert Murdoch. This is a once in a lifetime opportunity for Bewkes and Time Warner shareholders. Not every day do one of the most powerful people in the world come knocking to give you a $100 billion check, give or take a few billion.
In 2001, Citigroup (C), the seventh-most powerful major bank in the world with annual profits of $13.4 billion, decided to buy Banamex, the largest bank in Mexico, founded in 1884. But shareholders declined that offer just like Time Warner (TWX) shareholders already declined the current offer.Alfredo Harp Helu who was the CEO of Banamex at the time and Citigroup offered this simple but effective deal: Convince the rest of the shareholders to sell the bank and you get 10% of the deal. Banamex was eventually sold to Citigroup for $12.5 billion and he got $1.25 billion and he became one of the wealthiest men in the world at the time. 13 years later he is still the 16th wealthiest man in Mexico with a fortune of $942 million. NOTE TO RUPERT MURDOCH: Offer Bewkes 1% of the deal and he will become one of the wealthiest people in the world overnight. HBO is not the largest Time Warner business by sales. In fact, this subsidiary is the smallest. Almost half of the money from Time Warner comes from Warner Bros. Revenues for this subsidiary were $12.3 billion in 2013. In second place comes Turner, which brings almost $10 billion to the table or almost 40%. HBO is a distant third place with only $4.9 billion in revenues. When you are buying a company as large as Time Warner you need to recover your investment using synergies. HBO may be a very valuable cash cow and if you use your credit cards to buy this company then you can pay your monthly payments to MasterCard (MA), Visa (V), American Express (AXP) and Discover Financial Services (DFS) with the massive annual profits of $3.6 billion the company currently has. Nobody in the media industry can write a $27 billion check, assuming he increases the offer to $90 billion and also increases the stock component to 70% from 60%, not even Rupert Murdoch. If he wants to buy Time Warner he needs to do three things:
- Sell some assets, which he is doing right now.
- Sell some Time Warner assets like CNN, which Leslie Moonves, the CEO of CBS (CBS) wants.
- Swap 49% of DC Comics for 49% of Marvel Comics in order to produce this film and this film, which obviously would sell more movie tickets than Avatar and Titanic combined.
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