The risks of a deal are becoming more apparent as 21st Century Fox CEO Rupert Murdoch prepares to sweeten the $80B offer that Time Warner rejected, MoffettNathanson Research’s Michael Nathanson observes in a thought-provoking report this morning. With memories of the AOL Time Warner debacle still fresh in their minds, Time Warner execs won’t accept a non-cash bid “unless it is wildly generous,” the analyst says. He hopes Fox draws the line at $100 a share, up from $85, but notes that Murdoch could go to $105 without losing his company’s investment-grade debt rating. Yet if he prevails at that price, then Fox would have little margin for error. And Nathanson warns that mega-mergers “are more complicated than the simplicity of adding two Excel spreadsheet models together.”

The bottom line is that Fox’s stock “is in purgatory”as long as Murdoch’s interest in Time Warner remains alive. And the legendary dealmaker may not be able to pull it off. “After initially believing that this deal gets done at $100 per share, we have our doubts that it will be done at all,” Nathanson says. Among his concerns:

What’s up with Chase Carey?  The Fox COO is highly regarded on the Street, but his contract expires in mid-2016. Some shareholders “are nervous that this deal — and the value of [Fox's] stock — will fall short of expectations if Chase was to leave.”

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Too much general entertainment? Fox might be too fat with general entertainment networks if it adds Time Warner’s TBS and TNT to its FX. General entertainment channels have been “the biggest audience share losers over the past four years,” Nathanson says, with market share (measured by C-3 total day gross ratings points for 18 to 49 year olds) falling to 43% in the most recent TV season from 47% in 2009-10. “A lack of quality off-net syndication acquisitions, a shortage of blockbuster films available for purchase and increasing competition for original dramas has made the general entertainment network genre a tougher model to try to turn around.”

That leads to the sports question — whether Murdoch wants Time Warner, in part, to secure its NCAA, MLB, and NBA licensing deals for his channels including Fox Sports 1. “It is our understanding that these sports rights cannot be moved to other networks as they currently stand,” Nathanson says. But even if Murdoch can negotiate changes, it would exacerbate programming problems at TNT where NBA games account for 14% of its ratings and a greater percentage of ad dollars.

What would happen in Hollywood? “While ripping out studio overhead seems like a sure thing, our industry contacts believe that studio mergers fail to deliver on the 1+1=2 simplicity found in our models,” Nathanson says. Some execs would probably bolt under a new regime. What’s more, Warner Bros’ TV studio might suffer once it’s allied with a major broadcast TV network. WB’s independence “has helped attract key talent looking for the best arms-length TV licensing deal.”