Time Warner Takeover Rumor Set to Reward these Mutual Funds

Jul 17, 2014

There’s been lots of takeover buzz with yesterday’s report that Time Warner (TWX) is being targeted as an acquisition from Rupert Murdoch’s Twenty-First Century Fox (FOXA) company. In looking at the media landscape, any deal of this size will come with the usual regulatory hurdles one would imagine. Some of the early deal feedback lays the groundwork for TWX-owned CNN as being a property that could possibly have to be divested to get a deal approved.

If this is the case, a number of suitors, including Disney (DIS), Comcast (CMCSA), and CBS (CBS), could be circling the waters as potential landing spots for the CNN brand. Back to the deal itself, Time Warner shares ramped up 17% and are up a bit more this morning as several analysts are making the case for a deal to get done in the $100-$120 price range and still be earnings accretive for Fox.

Looking at some of the top mutual fund holders of Time Warner shares below, we see some well known funds having made big bets on Time Warner:

Time Warner shares are up 35% over the last 12 months and while a takeover deal is attractive, there’s no certainty that management will want to sell. Looking at some analyst projections, the company could make $6.00 in EPS by 2016, which could have shares reach $100 quite easily.

Will the Takeover Happen?

Those who are hoping for a deal to get done are looking at Time Warner’s recent moves to clean up its structure. TWX recently spun off its magazine publishing company Time Inc., which is just the latest in what has been a busy last couple of corporate maneuvers. In 2009, TWX spun off Internet company AOL Inc. and cable access provider Time Warner Cable Inc. into two separate companies. Years earlier, Time Warner shed its recording label, Warner Music Group.

One last anecdote to consider for market watchers: Rupert Murdoch’s appetite for deals has come at significant market turns. Dating back to the $5.3 billion acquisition of Chris Craft in 2000, the $5.6 billion acquisition of Dow Jones in 2007, and a $12 billion bid for the portion of BSkyB that the company didn’t own back in 2011 all coincided with market peaks.

For now, Time Warner mutual fund shareholders may not be care about that last part, but instead just hope a takeover price only goes higher!

The Bottom Line

Though it remains to be seen whether FOXA will actually offer a successful takeover bid for TWX, certain mutual funds will still benefit as the takeover possibility pushed TWX’s stock price higher.