Time Warner Moves to Thwart Fox Bid by Changing Bylaws

Time Warner Inc.’s board took its first concrete step to fend off Rupert Murdoch’s unwanted takeover offer by eliminating a provision in its bylaws that let shareholders call special meetings.

The amendment by Time Warner’s board removes a method investors could have used to pressure the company to sell. Time Warner rejected an unsolicited takeover offer of about $75 billion from Murdoch’s 21st Century Fox Inc. earlier this month.

The change was approved unanimously by the board and would delay any action by shareholders to force a vote until June, when the company typically holds its annual meeting, a person familiar with the matter said. It also gives Time Warner more time to prove to investors that it’s better off on its own than with Fox, an argument Chairman and Chief Executive Officer Jeff Bewkes made last week in a video message to employees.

The move by Bewkes “has a chance of backfiring, of annoying shareholders,” Chris Marangi, a money manager at Gamco Investors Inc., said in an interview with Stephanie Ruhle and Erik Schatzker on Bloomberg Television today. “It’s not particularly shareholder-friendly, certainly. He’s clearly, at best, trying to get a higher price.”

Gamco, which had $47.6 billion under management as of March, still owns both Time Warner and Fox shares, Marangi said.

Old Rules

Under the old rules, investors representing at least 15 percent of Time Warner’s shares could have called for a meeting as soon as February, said the person, who asked not to be identified discussing the company’s strategy.

Shares of Time Warner fell 0.7 percent to $86.78 at the close in New York, their first daily decline since Fox’s offer was disclosed on July 16.

Time Warner plans to reinstate the special meeting provision in its 2015 annual meeting, the New York-based company said yesterday in the filing. The bylaws now say that the CEO or a majority of the board can call a special meeting.

Even with the rule change, Time Warner is still vulnerable to a takeover if Murdoch can persuade shareholders to vote out a majority of Time Warner’s 12-member board at its next annual meeting when all of its directors come up for renewal. Time Warner could further change its bylaws to stagger the terms of its directors so only a minority of its members come up for a vote in any one year, making a takeover more difficult.

A merger of the two media giants would bring Time Warner’s collection of cable networks, such as HBO and TNT, under the purview of Fox, the owner of channels such as Fox News and FX. Fox estimates the combination could produce at least $1 billion in annual savings, people familiar with the matter said last week.

Fox is open to increasing its proposal, depending on Time Warner’s willingness to discuss a deal, the people said at the time.

Julie Henderson, a spokeswoman for Fox, declined to comment on Time Warner’s change to its bylaws. Keith Cocozza, a spokesman for Time Warner, also declined to comment.

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