Why Does Fox Want to Buy Time Warner?

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July 16 (Bloomberg) -- Erik Schatzker examines possible reasons for a Twenty-First Century Fox and Time Warner deal. He speaks on “Bloomberg West.” (Source: Bloomberg)

All day long, what do you think is the rationale behind this deal?

I have spent quite a lot of time talking with people who are deeply involved in the bidding process for time warner cable people.

Who have direct knowledge of what has been discussed and why.

To answer your question, it is not vanity, or i have been persuaded that it is not vanity.

It is about taking advantage of synergy.

This is between a foxx and a time warner.

They have identified at least a billion and a half dollars of cost overlap that can be eliminated right away and helped to justify the 20% premium that foxx has put on the table.

They believe to build a much more powerful brand internationally.

They had not had it that easy expanding the carriage in europe.

Rupert murdoch believes that the competition of time warner and foxx would make -- would give them the programming, the platform to have much more negotiating leverage in europe and to expand the company's reach.

Furthermore, they don't believe that they can run hbo better than any other asset has.

They do leave that more can be done with hbo overseas.

If you take cable and satellite, add to that hbo, and then sports rights that time warner has two major league baseball, the nba, and the ncaa, you have three legs of a stool but they believe supports a very firm rationale for the combination between foxx and time warner you might not be will to get with two other companies.

Hbo is the crown jewel.

What about cnn.

If this happens, what is the actual value of cnn to time warner?

Foxx and its advisers believe that they could get at least $6 billion for cnn and that value is calculated on the basis of a low double-digit multiple, earnings before interest taxes, amortization.

Cnn has about ebitda of about $5 billion.

That is just on cnn as a business, its value to say a strategic buyer.

If vanity work into the equation, in the party of someone looking at cnn, they believe that cnn would be closer to eight or $10 billion.

Already there is $6 billion of value there to be recouped.

$75 billion minus six gives you a $60 billion purchase.

There is at least $20 billion of value currently and much more upside, and again if they were to be successful in expanding it internationally.

Ok, thank you so much for breaking it down for us.

It is likely that time warner

This text has been automatically generated. It may not be 100% accurate.


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