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Wells Fargo Pours Cold Water on Time Warner (TWX) Speculation

January 13, 2016 7:57 AM EST
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Wells Fargo analyst Marci Ryvicker is pouring cold water on the idea that Time Warner (NYSE: TWX) will be sold, saying they don't believe the speculation believe the speculationt hat CEO Jeff Bewkes held a closed-door meeting with investors, and i) stated he's against a sale or spin-off of HBO as "splitting up can destroy value;" and ii) the article infers that Mr. Bewkes was open to selling the entire company by his response to certain M&A questions

Ryvicker commented: "We were not in the meeting that The NY Post is referring to (obviously), but we have a hard time believing that TWX's CEO told investors in a "closed-door meeting" that he is contemplating putting TWX up for sale, as a) it is not Mr. Bewkes' decision - it is a decision to be made by the entire board; b) as far as we know, it's illegal to discuss material info like that in a non-public setting; and c) we would imagine that IF a meeting took place and IF Mr. Bewkes was asked about a sale, we don't think the supposed response of "we are interested in creating shareholder value" automatically implies yes."

The analyst said their sum-of-the-parts doesn't matter since: 1) We don't think TWX would ever sell in pieces - it makes no sense to us. 2) A sum-of-the-parts is always just math; and to be frank, our math doesn't matter. Only TWX's math matters - and we'd imagine the multiples TWX would use IF it were to sell itself (WHICH WE AGAIN DON'T THINK WILL HAPPEN) would be higher than we put on paper.

On a potential buyout from 21st Century Fox (NASDAQ: FOXA), the analyst notes the stock is a turn and a half below TWX, when excluding hidden value such as Sky. FOXA was a turn HIGHER than TWX the last time it contemplated a purchase. Also, they don't know why Amazon or Apple would want the whole company and they don't think CBS is in the business of buying someone 2.5x times its own size.

They don't see TWX spinning off HBO and don't think Mr. Bewkes' new employment contract has anything to do with this.



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