Janney Montgomery Scott Upgrades Time Warner (TWX) to Buy; Fox Could Pay Up to $160/Share

Janney Montgomery Scott upgraded Time Warner (NYSE: TWX) from Neutral to Buy with a price target of $100.00 following yesterday's disclosure of an unsolicited takeover bid by Rupert Murdoch's Twenty-First Century Fox (NASDAQ: FOXA)

Analyst Tony Wible states, "We believe FOX will increase its bid for TWX, as we see earnings accretion on an all stock deal valued up to $160/share. As we had highlighted in our June note on TV mergers: "TV Merger Matrix - Who Is Next?", we believe this transaction is one of the few mega-cap ones that makes both too much strategic and financial sense to ignore. Essentially, there is significant room to negotiate a higher price before a deal would dilute earnings. While this does not affect our mixed views on underlying fundamentals, we are upgrading TWX to BUY, as we believe investors will increasingly value it on its strategic benefits rather than the near term fundamentals. The potential upside from its strategic value to FOX leads us to raise our FV TO $100."

He adds, " The deal would become neutral at $101 in an all-cash deal but breaks even at $160 in an all stock transaction. Simply put, FOX has the capacity to pay more but would likely target a mix of stock and cash. Our new $100 FV assumes an offer could come at the more conservative end of the deal scenarios. Note that our breakeven analysis does not take into consideration revenue and cost synergies."

For an analyst ratings summary and ratings history on Time Warner click here. For more ratings news on Time Warner click here.

Shares of Time Warner closed at $83.13 yesterday.

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