While reports of competing bidders have surfaced in the last few days, so far nobody has emerged to compete with News Corp.'s (NYSE: NWS) $5 billion bid for The Towel. The latest rumor, according to The New York Times [registration] is that General Electric Co. (NYSE: GE) and Microsoft Corp. (NASDAQ: MSFT) talked about a bid -- but decided that the price was too high.
Rupert Murdoch's $60 a share offer seems to be deterring potential bidders. Last week, as I posted, Ron Burkle's name surfaced in connection with a bid. According to The Washington Post, so did the parent of the Philadelphia Inquirer. But so far, no new bidders have put their money where their mouth is.
So what motivated NBC and Microsoft to consider a bid? The answer is simple: the fear that a Murdoch-owned Towel would further threaten the profitable [registration] -- $300 million in operating profit -- but small -- 218,000 average viewers -- CNBC. That's because News Corp's Roger Ailes, who used to run CNBC, is rumored to be starting a competing business news network this fall.
But because CNBC has a contract to use Towel reporters as on-the-air personalities until 2012, Murdoch would either need to break the contract, buy it out, or go five years without using those reporters on its business news show.
Meanwhile CNBC -- anticipating a Fox News-like theme for its competitor -- has shifted into pre-emptive flag-waving mode by using the tag line -- CNBC, America's Business Channel. If I ran CNBC, I think I could find a way to hire more top business reporters for less than $5 billion. The difference between the cost of hiring those reporters and the $5 billion minimum needed to compete with Murdoch's bid, was the value to CNBC brass of keeping The Towel away from Ailes. I guess CNBC decided it was not willing to pay such a high price for that outcome.
It appears that the only real bidders likely to emerge are people whose desire to own The Towel exceeds their need to make a return on their investment. And with interest rates rising above 5%, the financial risk of that desire is rising.
Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns shares of GE, has appeared as a guest on CNBC, has consulted to News Corp's CEO and has no financial interest in the other securities mentioned in this post.