Fox's Bid for Time Warner Includes Voice on the Board

21st Century Fox is prepared to offer shareholders of Time Warner Inc. board representation as part of its bid to acquire the media company, according to a person familiar with the matter.

Fox, which made a roughly $80 billion cash-and-stock offer that Time Warner rejected earlier this month, believes that giving Time Warner shareholders a voice on the board of the combined company would make the deal more appealing, the person said. It isn't clear how many seats Fox would offer.

The family of 21st Century Fox Chairman Rupert Murdoch has effective control of the company through a roughly 39% voting stake. The stock Fox offered for Time Warner was non-voting shares, which people close to Time Warner have cited as one of the reasons it rejected the bid, along with the price. Time Warner is concerned that its shareholders would have little to no say over how a combined company would be run despite owning roughly 40% of it, the people say.

A person familiar with Time Warner's thinking said the offer of board seats would make no difference in the Time Warner board's deliberations, given Mr. Murdoch's control of the company and the limited role of Fox's board. The person described the proposal of board seats as a "cosmetic" move.

Mr. Murdoch made a similar offer of board seats when his News Corp acquired Dow Jones & Co., publisher of The Wall Street Journal, in 2007. A member of the Bancroft family, which used to control Dow Jones, still sits on the board. (News Corp was split up last year, with the company housing the entertainment assets taking on the name 21st Century Fox and the company with the publishing assets taking the News Corp name.)

Bloomberg earlier reported that Fox is open to giving Time Warner shareholders board representation.

Despite the initial rejection by Time Warner, Fox is continuing its pursuit. People familiar with the company's thinking say it plans to be disciplined and is prepared to consider raising its offer only to between $90 and $95 per share, from the original offer pitched at $85 a share in a mix of 40% cash and 60% stock. But that price range won't be enough to change the mind of Time Warner directors, says a person familiar with Time Warner's thinking.

If Fox were to bid too high and take on too much debt, it could face the risk of a credit rating downgrade, some credit ratings agencies have said. Fox wants to protect its investment grade rating, people familiar with Fox's thinking have said.

Fox will get some added financial flexibility through a proposed sale of satellite-TV holdings in Europe that is expected to net after-tax proceeds of $7.2 billion. Fox also could bring in between $6 billion and $10 billion from selling off news channel CNN under its proposed offer, analysts say, and it is lining up a $25 billion line of credit.

In part to allay concerns from some investors, Fox last week promised to authorize a new share-buyback plan.

As the takeover saga plays out, much will depend on how the two companies perform. People close to both companies have played up the risks in the other's operations. Both Fox and Time Warner report earnings on Aug. 6.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires