Many have rebuffed Rupert Murdoch's initial overtures only to give in eventually. Will Time Warner (NYSE:TWX) join a list that includes Dow Jones and the U.K.'s now-defunct News of the World? Guest host Alison Southwick puts this question to Fool analysts Nathan Alderman and Tim Beyers in this episode of 1-Up on Wall Street, The Motley Fool's Web show in which we talk about the big-money names behind your favorite technology, movies, toys, video games, comics, and more.
Last week, Murdoch's Twenty-First Century Fox (NASDAQ:FOXA) offered $80 billion to acquire Warner, which refused the overture. The stock has soared in the days since yet trades for only $77 billion in market cap as of this writing:
What does Murdoch see that common investors don't? Apparently, he and the Fox team value HBO at $20 billion, or fully one-quarter of what Murdoch was willing to pay for Warner's vast media empire. Bloomberg says that Fox had planned to expand the pay network's reach internationally and via mobile devices while bringing more of its own content to HBO subscribers.
Tim says that Murdoch isn't wrong about HBO's potential, but Time Warner has also been undervalued for some time. Investors are taking notice now because it was only last month that Time's (NYSE: TIME) profit-draining magazine operation became a separate entity, leaving Warner to reap unencumbered profits from its biggest movie and TV hits -- a sweet arrangement that chief Jeff Bewkes apparently values enough to refuse Murdoch's rich overture.
Nathan says Warner also expressed concerns over how control Murdoch and his family would exert over Warner. He's already established supermajorities of the voting shares for both Fox and News Corp. (NASDAQ: NWSA), giving him unchallenged control of both companies. It's a fair bet he'd treat Warner similarly.
That's a legitimate concern for investors. According to Institutional Shareholder Services (ISS), stocks of public companies that use a dual-class structure where one family controls the majority of voting shares tend to underperform their peers. (Click here for the report.) There's no reason to believe Fox-Warner would perform differently, Nathan says.
Now it's your turn. Click the video to watch as Alison puts Nathan and Tim on the spot, and then leave a comment to let us know what media stocks you find most attractive right now. You can also follow us on Twitter for more segments and regular geek news updates!
Alison Southwick owns no shares in any stocks mentioned. Nathan Alderman owns shares of Berkshire Hathaway. Tim Beyers owns shares of Berkshire Hathaway, Time, and Time Warner. The Motley Fool recommends and owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.