On July 16, Jeffrey Bewkes, the chief executive officer of Time Warner (TWX), took to the Internet to fend off the advances of Rupert Murdoch and 21st Century Fox (FOX). In a short video directed at his employees, Bewkes insisted that Time Warner wasn’t for sale and that it would be better off on its own. Wearing a gray suit and dark tie, his hair more tousled than usual, he spoke earnestly, concluding with an irreverent smirk that suggested everything was under control. It was a solid performance, but it didn’t have the desired effect. Time Warner’s share price leapt 17 percent that day, as investors salivated and rumors circulated that Murdoch would up his bid.
Bewkes is a victim of his own success. He’s spent much of the last six and a half years carefully transforming what was once the world’s largest media company into a smaller amalgam of cable-TV and film production units destined to become an acquisition target. Murdoch’s offer is the culmination of a strategy that ultimately might cost Bewkes his job.
That may have been his intention all along. Running a media company is considered one of the more desirable jobs in business. You get to go to parties with movie stars and are more likely to be seen in the pages of Vanity Fair than, say, the leader of Home Depot. It’s hard to imagine Murdoch giving up his gig, even at 83. (And he doesn’t have to—his family controls almost 40 percent of the voting shares of 21st Century Fox.)
Bewkes is different. He keeps a fairly low profile, often eating a sandwich at his desk rather than going to a glitzy Manhattan restaurant where he might be noticed. Friends and former Time Warner colleagues say he’s unsentimental about his company. “I don’t think he ever wanted to be CEO for life,” says Michael Nathanson, a media analyst at MoffettNathanson. “He’s a businessperson. He’s not a romantic.”
After an early stint at Citibank, Bewkes joined what was then Time Inc. in 1979, taking a job at HBO, the company’s fledgling pay-TV network. He struck colleagues as both shrewd and self-aware, and he was clearly going places. “Most people thought he would have a really good chance of being CEO of Time Inc.,” says friend and former HBO executive Curtis Viebranz, who started at the network a year after Bewkes and worked there for 17 years.
Bewkes eventually made it to the top, but not before the company went through three turbulent mergers orchestrated by former CEO Gerald Levin, who fancied himself a visionary. In 1989, Time Inc. joined with Warner Communications to form Time Warner, the world’s biggest media company. Seven years later, Time Warner consumed Turner Broadcasting, owner of CNN and the Atlanta Braves. Combining the companies wasn’t easy. Executives clashed, and Time Warner’s stock price languished until the late ’90s.
In 2000, Levin announced the AOL-Time Warner merger. The new company was valued at $186 billion, but that shriveled to $114 billion a year later with the popping of the Internet bubble. In 2002, AOL Time Warner took a $54 billion writedown, at the time the largest in corporate history. Bewkes was one of the few Time Warner executives who warned of a coming disaster, according to two former executives. After Levin left, Bewkes helped hasten the departure of the AOL guys. It was a hollow victory. The AOL people had been enriched by the merger, while many veteran Time Warner executives and investors lost out.
The last thing Wall Street wanted was another visionary leader at Time Warner. Friends and former colleagues, who declined to be identified because they weren’t comfortable publicly discussing their old boss, say Bewkes was acutely aware of how employees and shareholders had suffered. When he was named CEO in 2008, they say, he felt it was his duty to increase shareholder value. This is something CEOs often talk about, but Bewkes took the responsibility especially seriously. “I’m sure Jeff never imagined that he would recapture all the equity that was drained into the rathole, but he was going to do his best,” Viebranz says.
Bewkes started by disposing of what he considered Time Warner’s noncore assets. In 2009 the company spun off Time Warner Cable (TWC) and the troubled AOL (AOL) division. Earlier this year, Time Warner completed a long-anticipated public offering of Time Inc. (TIME) Bewkes wasn’t unhappy to shed these businesses, some of which had defined the company for decades, according to two former Time Warner executives. It irked him, they say, that the magazine division didn’t deliver the same profit margin as the film and television divisions.
Investors were relieved as Bewkes dismembered Time Warner, and the company repurchased its stock. Finally, they were being rewarded. “He’s basically been raising the value of the company by buying stock back,” says Mario Gabelli, founder of Gamco Investors (GBL) and a longtime Time Warner shareholder. “What’s wrong with that?” Bewkes’s job certainly wasn’t as glamorous as that of Walt Disney (DIS) CEO Robert Iger, who negotiated deals to purchase Marvel Entertainment and Lucasfilm during this period, or even Comcast’s (CMCSA) Brian Roberts, whose company swallowed NBCUniversal. But Time Warner’s investors didn’t care about that. Before Murdoch’s offer, the company’s stock had already climbed 145 percent in the past three and a half years.
The media industry is in the middle of another consolidation. In February, Comcast announced it would buy Time Warner’s former cable division for $45 billion. And in May, AT&T (T) struck a deal to purchase DirecTV (DTV) for $48 billion. Bewkes couldn’t have been surprised when an old friend, Chase Carey, the chief operating officer of Fox, made an offer for Time Warner over lunch in Manhattan on June 9. As Bewkes told his employees on July 16: “Time Warner has unique and powerful brands and leading businesses that are the envy of our competitors. So it’s not surprising that we might attract attention from others.”
While Bewkes might prefer a more competitive bidding situation, he may be stuck with Murdoch. Comcast and AT&T are busy completing their deals. Investors such as Gabelli are publicly encouraging a sale. “I think the deal gets done at $100 a share,” Nathanson says. Bewkes would walk away with $79 million because of a change-of-control provision in his contract.
Bloomberg News has reported that Murdoch has asked Bewkes in a letter to stay on if a deal happens, although it’s clear he’d no longer be in charge. His former colleagues don’t expect Bewkes to stick around for that. Such a departure would be unthinkable to a guy like Murdoch, but Bewkes may decide that his primary job—making his shareholders whole—is done. “I bet if you gave Jeff the truth serum, he’d probably say: ‘Gosh, I wish I was still back at HBO running HBO,’ ” Viebranz says. “He probably had more fun at HBO than he’s had with running Time Warner.”