Yesterday proved a difficult day for Wall Street as two major merger deals collapsed, resulting in the loss of a staggering $100bn.
The first to collapse was a bid by Rupert Murdoch’s 21st Century Fox’s $71bn to buy rival Time Warner. Murdoch blamed the failed deal on Time Warner’s reluctance to “explore an offer which was highly compelling”.
While the collapse of both takeovers are not linked, the timing hints at a worrying stumble
Hours later telecom giant Sprint announced that it was cancelling its own attempt to buy rival T-Mobile, in a deal worth around $30bn. Sprint’s Japanese owner, Masayoshi Son, had reportedly been under considerable pressure from regulators to back away from trying to merge two of the US’s leading telecom companies.
Fox’s attempt to buy Time Warner came as a surprise when it was officially announced a few weeks ago, and faced considerable resistance from the board of the target company. With so many valuable properties, including popular cable service HBO, Time Warner feels it is well placed to continue to perform independently of any tie-ups with the likes of Fox, which is part of Rupert Murdoch’s sprawling global media empire.
While the collapse of both takeovers are not linked, the timing hints at a worrying stumble for what many observers were hoping would be a period of consolidation in both industries. Media companies are experiencing a period of transition currently, with new digital rivals emerging to challenge the traditional cable operators in television. Similarly, telecom companies around the world have long been expected to consolidate in an effort to standardise the industry.
Still, it hasn’t been an entirely bad year – so far there have been a number of big mergers that have given shareholders a great deal of profit. Certainly in digital industries there have been some colossal transactions, including Facebook’s $16bn acquisition of messaging app Whatsapp, as well as Apple’s $3bn deal to buy headphone and music service Beats.
