After Pushback, Murdoch Abandons Fox’s Pursuit of Time Warner

Updated, 9:12 p.m. |  At 4:07 p.m. Tuesday, the chief executive of Time Warner Inc., Jeffrey L. Bewkes, received an unexpected email.

“On behalf of our board and senior management team, I am writing to inform you that we are withdrawing our offer to acquire Time Warner, effective immediately.

Sincerely, Rupert Murdoch.”

A hand-delivered letter bearing the same message arrived soon after.

Thus ended — for the time being, anyway — what was shaping up as the biggest media merger in a decade, a $150 billion union of two giant conglomerates. Together, Mr. Murdoch’s 21st Century Fox and Time Warner would have created a colossus that loomed over the industry, combining the two biggest movie and television studios in Hollywood and enabling Fox to try to challenge ESPN’s sports broadcasting dominance. It also would have melded two vastly different corporate cultures: the generally liberal Time Warner, home of HBO, and the more conservative Fox, home to Fox News.

Ultimately, though, Mr. Murdoch decided to walk away. He was put off both by Time Warner’s apparent hostility to the prospect of the deal and by the response of his own shareholders, who have been driving the price of Fox’s stock down since news of the offer broke, fearing he would overpay to secure victory.

“Time Warner was really digging in,” said Michael Nathanson, of the research firm MoffettNathanson.

In addition to Time Warner’s entertainment and sports properties, Fox wanted to add size, and thus leverage, as distributors like Comcast and AT&T undertook megamergers of their own, threatening greater negotiating power over content producers.

Discussions about whether to withdraw the $80 billion offer had arisen periodically since 21st Century Fox first went public with its interest in mid-July, and gained momentum in recent days. Mr. Murdoch and his senior leadership team made the call to pull the plug on Monday, according to people briefed on the matter, who declined to be identified. Mr. Murdoch brought the decision to 21st Century Fox’s board on Tuesday.

“Time Warner management and its board refused to engage with us to explore an offer which was highly compelling,” Mr. Murdoch said in a statement. “Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders.”

The decision to walk away represents one of the biggest defeats in Mr. Murdoch’s six-decade career as a daring deal maker. Since taking over his family’s small newspaper company, he has built one of the world’s most powerful empires through takeovers driven in part by the sheer force of his will.

But acquiring an unwilling Time Warner, a blue-chip name in the media business, was proving to be his biggest challenge to date. Succeeding would have been a career-capping triumph, particularly after the damaging phone-hacking scandal in Britain. Had Mr. Murdoch managed to pull it off, he would have virtually doubled the size of the empire he will eventually leave to his two sons, James and Lachlan.

Fox has insisted that it intended its offer to be seen as friendly. The company’s president and chief operating officer, Chase Carey, first presented the $85-a-share bid to Mr. Bewkes in June.

But from the start, Time Warner treated the advance as anything but friendly. Mr. Bewkes rejected the offer categorically in a terse letter to Mr. Murdoch, and then refused to engage in any conversations about a possible deal. Time Warner went so far as to protect itself against a hostile takeover by changing its bylaws to remove a provision allowing stockholders to call a special board meeting.

Fox’s executives were surprised by the vehemence of Time Warner’s opposition. Perhaps just as surprising was the reaction from Fox’s own shareholders. Shares in the company have fallen 11 percent since Mr. Murdoch first took his bid public, even as 21st Century Fox executives sought to convince investors and analysts that they would remain disciplined and not bid too much. Fox Class A shares, which traded at $35.19 before the bid was disclosed, closed at $31.30 Tuesday, then rose more than 8 percent in after-hours trading once the company withdrew its offer. Time Warner had made clear that the price to even begin talks was high, with people close to the company suggesting that Fox would need to raise its bid to more than $100 a share.

It is unclear whether Time Warner was simply engaging in the usual deal-making gamesmanship or if it really was determined to remain independent. The company took pains to suggest the latter in its public statement after Fox’s withdrawal on Tuesday.

“Time Warner is well positioned for success with our iconic assets, including the world’s leading premium television brand, the world’s strongest ad-supported cable network group and the world’s largest film and television studio,” it said. “We thank our stockholders for their continued support.”

Either way, the burden will now be on Time Warner to prove to its investors not only that it can grow the company faster without Fox, but also that it did not miss a chance to make them a lot of money. Its shares, which rose from $71 before the bid to as high as $88 in recent weeks, fell 10.6 percent in after-hours trading Tuesday to $76.20.

“Why was it not worth at least sitting down and having a discussion?” said Rich Greenfield of BTIG Research. “That’s a question that Jeff Bewkes and Time Warner will have to answer.”

They will have their first opportunity to do so on Wednesday, in a call with analysts after the company reports its quarterly earnings.

For its part, Fox is expected to insist that it will return to business as usual when it also reports earnings that same day. The company is not now contemplating any other big acquisitions, according to the people briefed on its plans. On the contrary, it announced on Tuesday that it planned to buy back $6 billion worth of its shares, because it thought them undervalued.

Privately, Fox and its team have argued that the company remains in good shape, with one of media’s highest trading multiples. Pursuing Time Warner, they have said, was a good opportunity, but not a necessity.

Media watchdog groups concerned over the prospect of Rupert Murdoch gaining so much sway over the culture celebrated the withdrawal of Fox’s bid. “No one should hold that much influence, but Murdoch, in particular, has demonstrated that he is far too irresponsible for that amount of power,” Media Matters said in a statement.

Despite the seemingly definitive pronouncements from both companies, investors and analysts still questioned whether the final chapter in the short-lived but dramatic courtship had been written.

“Too much thought went into Fox’s bid to think that this is gone forever,” Mr. Greenfield said. “But now, for this to move forward, it’s going to require Time Warner’s interest.”