Time Warner’s Non-Mogul Mogul Who Foretold Its Worth
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Version 0 of 1. Jeffrey L. Bewkes, the chief executive of Time Warner, made a big bet in the summer of 2014 when he rejected an $80 billion takeover bid by 21st Century Fox, controlled by Rupert Murdoch. Mr. Bewkes had promised shareholders that Time Warner would create more value on its own than any proposal Fox was positioned to offer. Privately, Mr. Bewkes was telling colleagues and investors that Time Warner was likely to land a much more lucrative deal if it were put on the market a couple of years later. Among the potential bidders, Time Warner reasoned, were deep-pocketed technology companies like Apple and Google — and even, possibly, AT&T, which was tied up with a different deal at the time. Over the next two years, it was not clear that Mr. Bewkes had played his cards right. Fears of cord-cutting, ratings declines and a weak advertising market stoked panic across the industry over the future of traditional media in a digital world. And while Time Warner introduced several efforts to transform the company, such as a stand-alone streaming service for HBO, questions persisted about whether the company would have the resources to compete with the likes of Netflix and Amazon. As it turns out, Mr. Bewkes’s bet paid off. In a big way. On Saturday night, AT&T announced that it had agreed to buy Time Warner for about $85.4 billion, or $107.50 a share in cash and stock — about a 35 percent premium to where Time Warner’s stock was trading before reports of the merger talks, and well above the $85 a share Fox was offering. AT&T and Time Warner promised to “lead the next wave of innovation” as the worlds of media, communications and technology collide. “For Time Warner shareholders, the price is exceptional,” said Brian Wieser, an analyst with Pivotal Research Group. And for Mr. Bewkes, the deal has sealed his legacy as a behind-the-scenes non-mogul media mogul. In an industry populated by larger-than-life executives like Mr. Murdoch and Sumner Redstone, whose activities have sometimes provided fodder for the gossip pages, Mr. Bewkes carved out a reputation as a personable numbers guy with a sense of humor and a low public profile. Mr. Bewkes lifted the company’s stock price, slowly but surely, by disposing of assets, eventually making his company the most attractive takeover target in the media market. “He is not an executive that is cut from the old-school media mogul cloth,” said Anthony DiClemente, an analyst with Nomura. “His legacy is very much that he did so well for shareholders, whereas another type of media executive, a personality like a Sumner Redstone, would want to continue to preside and reign over this powerful media empire.” In an interview on Sunday, Mr. Bewkes deferred a question on how he thought about the AT&T-Time Warner deal in the context of his own legacy as a media executive. “I don’t think of it as my legacy,” Mr. Bewkes said. “I think of it as the great institution of Time Warner, which has had a mission in this world since Henry Luce invented the magazine in 1923 and actually invented talking pictures in the years since.” Mr. Bewkes, 64, has worked at Time Warner for more than three decades. He became the chief executive of the premium TV network HBO in 1995, where he helped raise the network’s profile by pushing for more original programming. His purview expanded in 2002, when he was named chairman of the company’s networks and entertainment division. And in 2008, Mr. Bewkes succeeded Richard Parsons in the chief executive’s suite. At the time, the company was still reeling from its disastrous dot-com merger with AOL. Time Warner shares traded as low as $14. Mr. Bewkes whittled the company down, unloading Time Warner Cable, then AOL, then its Time Inc. magazine division. What remained was a focused and well-respected television and film company that owned HBO; Warner Bros. film and television studios; and cable networks including CNN, TNT, Turner Sports and TBS. “That gave us the best choice of whether we wanted to consolidate another company into ours, or it made us the most valuable company if we wanted to consolidate with someone else, which is what we have now come to,” Mr. Bewkes said. But Mr. Bewkes was not ready to exercise those options in the summer of 2014, when Fox appeared with its takeover offer. He said that he had never doubted the decision, in large part because Time Warner management considered the deal to be worth much less than it initially seemed. On the day that the Fox deal was announced, the transaction was worth about $80 billion. But that deal was heavily tilted toward Fox stock, which has lost about a third of its value since then. In addition, the transaction required taking out a substantial loan to cover the cash portion, and Time Warner would have assumed part of that debt. As a result, Time Warner estimates that the Fox deal would be valued at about $70 per share today. The AT&T bid represents about a 60 percent premium over the Fox offer. “We knew all that,” Mr. Bewkes said. “That is why we didn’t consider it.” It was a different story in August, when Randall L. Stephenson, AT&T’s chief executive, visited Mr. Bewkes at Time Warner’s headquarters in New York. The two executives discussed their views for the future of content and distribution amid the rise of streaming services that are blurring lines among the media, communication and technology industries. Their visions aligned, and a deal quickly fell into place. “We see a convergence,” Mr. Bewkes said. “It is not just creating content but introducing it to you as a viewer, wherever you go.” As an example, Mr. Bewkes pointed to more vigorous CNN offerings on mobile and better search and recommendation tools to discover HBO programming, whether a person is watching on a mobile phone, tablet or television set. Mr. Bewkes acknowledged that on its own, the media industry has been slow to put in effect new technologies that allow people to watch the programming they want to watch — when and how they want to watch it. “Look at how slow some of these companies have been to put these innovations in,” he said. “We can do things like that if we are together.” On Sunday, AT&T insisted that it would not try to influence its new assets in either the entertainment or news segments. “Our intent is to operate Time Warner as it operates today, with autonomy in its divisions, including the world-class creative talent and journalists that make Time Warner a leader in entertainment and news,” Mr. Stephenson said in a statement. “CNN is an American symbol of independent journalism and First Amendment free speech,” he added. “My board and I are clear — CNN will remain completely independent from an editorial perspective.” AT&T’s deal for Time Warner is expected to face intense regulatory pressure, and if it is approved, the companies do not expect it to close until late 2017. Mr. Bewkes, whose contract with Time Warner runs through 2020, is planning to stay with the company through a yet-to-be-determined transition period. Analysts said that they expected many other Time Warner executives to continue in their roles, because AT&T is a telecom company with little experience in programming. That was yet another contrast to the Murdoch offer. “Any offer that was made to Time Warner was prefaced with the notion that the key up-and-coming leadership within Time Warner would not be jettisoned,” Mr. DiClemente said. “That tone, in general, is a little different than the Murdoch tone, which was perceived as the expectation that they would be working for Rupert, James and Lachlan Murdoch.” “Culturally, this is more of a reason why this fits,” he added. Mr. Bewkes put it more bluntly. “This fell into place,” he said, “because it is kind of obvious.” |