Many investors say the best trading strategy around a potential takeover of Time Warner Inc by Twenty-First Century Fox is to wager that media baron Rupert Murdoch will pay up to get what he wants. The trick is that it may be too late to place the obvious bets. Time Warner said on Wednesday it had rebuffed Twenty-First Century Fox's roughly $80 billion bid, or $85 per share, in recent weeks over valuation and concerns that the Murdoch family will have too much power. But people familiar with Twenty-First Century Fox said Murdoch is determined to purchase the rival media giant.Hedge fund traders and options strategists said the traditional merger arbitrage trade - short Twenty-First Century Fox and buy Time Warner - played out when the news broke.Arbitrageurs seek to profit on the difference in stock prices between an acquirer and the target. In a deal that involves the swap of stock, that generally involves buying the target's shares and betting the acquirer's will fall. Murdoch made a stock and cash offer for Time Warner.But these traders said that the time for that bet may have passed. Time Warner's stock has risen 21 percent to $86.12, since the news broke. Twenty-First Century Fox has fallen nearly 7 percent.
Twenty-First Century Fox, Inc., formerly News Corporation, is a diversified global media and entertainment company with operations in cable network programming; television; filmed entertainment; direct broadcast satellite television, and other, corporate and eliminations. Shares of FOXA fell by 0.7% or $-0.23/share to $32.77. In the past year, the shares have traded as low as $29.42 and as high as $36.43. On average, 13034500 shares of FOXA exchange hands on a given day and today's volume is recorded at 38800580.
Time Warner Inc. (Time Warner) is a media and entertainment company. Shares of TWX traded higher by 3.6% or $2.99/share to $86.12. In the past year, the shares have traded as low as $57.59 and as high as $87.14. On average, 6967120 shares of TWX exchange hands on a given day and today's volume is recorded at 28072048.
Source
