Thursday, August 7, 2014

Time Warner 1 Murdoch 21st Century Fox’s 0 (Our View of a Economist Article on Time Warner vs. Murdoch)

To implement a proper takeover, one must devise and implement the perfect ambush. 

The initial move of a successful strategist is to understand the configuration of the grand territory of the target in terms of situations and the foundation behind those situations.

Murdoch's First Move 
21st Century Fox Inc.’s bombshell bid of $75 billion for Time Warner Inc. (TWX) started as a chat over lunch between two longtime friends: Fox President Chase Carey and Jeff Bewkes, Time Warner’s chairman and chief executive.

Carey, Rupert Murdoch’s No. 2 at Fox, approached Bewkes about a merger of the two media companies on June 9 in New York, people familiar with the matter said. Bewkes, 62, didn’t say if he supported a deal and raised several concerns ranging from Fox’s dual-class voting structure to what would happen with CNN, said the people, who asked not to be named because the matter is private. Time Warner’s CEO ended by telling Carey, 60, he needed to inform his board and would get back with an answer.

He never did.

Carey called Bewkes at least twice seeking a reply. Bewkes said he needed more time. 

Click here for the full post. 

The Outcome
Below is an excerpt from The Economist.The full post may be read here. Enjoy

Companies usually overstretch in two ways. They propose combinations that annoy regulators—despite the passionate appeals of Masayoshi Son, Softbank’s founder, American regulators were unimpressed by his plans to shrink the number of big mobile operators from four to three. Or they propose deals that test the limits of their balance-sheets and the patience of their investors. Mr Murdoch was offering a takeover premium of about $20 billion, more than the capitalised value of the cost savings that could have been achieved, suggesting the deal would have destroyed value for his shareholders. Reflecting this, his own share price had steadily fallen, reducing the value of the stock being offered to Time Warner. If Mr Murdoch chooses to bid again, he would have to find deeper cost savings. After Astra’s board dismissed an offer on May 26th, Pfizer’s shareholders had limited appetite for a dearer bid—although the American firm has not ruled that out.

By tradition, when deals flop, everyone pretends nothing has really changed. Thus Mr Murdoch declared that “21st Century Fox’s future has never been brighter”, while Mr Son said, “Our focus moving forward will be on making Sprint the most successful carrier.”

In fact failed transactions often have lasting consequences. Target firms that cook up ambitious forecasts as part of their defence face the hard task of meeting them. Astra said it expected sales almost to double by 2023 despite their being stagnant today. Share buy-backs are one way to rent some loyalty. Time Warner’s shares fell by 13% the day after Mr Murdoch’s exit. It plans to repurchase $5 billion of its shares, equivalent to 8% of its total.

Our View 
At this level of the "Competitive Capitalism" game, was this move,  "a test run" or was there an alternative motive/target behind this failed takeover?  

If you were in their place, what is your strategic target and what is your grand tactical approach?

Our Approach
Matching the "Sunzi's Nine Situations" to one's own grand situation while completing one's own grand objective.

The Concept
Before confronting the competition, the successful strategist always performed the following strategic moves:
  • Securing the path of least resistance (the sixth situation); .
  • Encircling the competition while minimizing their strategic options (the eighth situation); and 
  • Positioning the competition where any retaliation becomes futile (Avoiding the ninth situation).
The Thought of the Day
If this was their tangible move, Murdoch and his strategic team erred because of their poor assessment of the target's strategic prowess. 

While in the state of pausing, they are now quietly contemplating and waiting for their next big target. 

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