The surprise announcement sent Fox shares +8% in after-market trading and Time Warner -11.9%. Fox CEO Rupert Murdoch says that his $80B offer — which the owner of Warner Bros, HBO, and Turner Broadcasting rejected — “had always been friendly.” But the company “refused to engage with us.” He says he also was swayed by the drop in Fox’s stock price as investors feared that Murdoch might overpay to become the dominant producer of movies and TV shows, with sports rights that could rival ESPN’s. To prove them wrong, he has committed to add $6B to his share-repurchase plan for the next year.

Related: Should Fox Shareholders Hope Murdoch Doesn’t Buy Time Warner?

21stcenturyfox1__131014203730-275x122Prior to the withdrawal, several analysts had begun to wonder whether Murdoch would be able to prevail. Time Warner likely would want at least $105 a share — possibly more — and that would make it a money loser for Fox which initially offered $85 in cash and non-voting stock. Time Warner said on July 16, when word of the offer began to spread, that it was “confident that continuing to execute its strategic plan will create significantly more value for the Company and its stockholders and is superior to any proposal that Twenty-First Century Fox is in a position to offer.”

Tribeca Talks Industry: The Business Of Entertainment - At The 2011 Tribeca Film FestivalThe Fox effort was “poorly received” by its investors, Morgan Stanley’s Benjamin Swinburne said this morning arguing for Murdoch’s company to drop the idea. It “is not a transaction that HAS to happen for defensive reasons, or for massive potential cost synergies. Therefore, it is a transaction that is only compelling at a certain price and assuming successful execution.”

Related: Will Anyone Besides Rupert Murdoch Take A Run At Time Warner?

But Murdoch’s apparent change of heart puts Time Warner in a difficult position. Its shareholders have seen the stock rise to $85.33, the highest it’s been in more than a decade — and now find it down to $75.75. That will put pressure on CEO Jeff Bewkes to prove that he can do more for them than Murdoch. Time Warner and Fox release their Q2 earnings tomorrow, followed by calls with analysts.

Here’s the Fox release:

New York, NY – August 5, 2014 – 21st Century Fox (NASDAQ: FOXA, FOX) today announced that it has withdrawn its proposal to acquire Time Warner Inc.
Chairman and CEO Rupert Murdoch commented:

“We viewed a combination with Time Warner as a unique opportunity to bring together two great companies, each with celebrated content and brands. Our proposal had significant strategic merit and compelling financial rationale and our approach had always been friendly. However, Time Warner management and its Board refused to engage with us to explore an offer which was highly compelling. Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders. These factors, coupled with our commitment to be both disciplined in our approach to the combination and focused on delivering value for the Fox shareholders, has led us to withdraw our offer.

“21st Century Fox’s future has never been brighter. The strength of our leading franchises, combined with the power of our emerging growth businesses and the leadership positions of our international enterprises put us on a path for even greater success.”

The Board today authorized a $6 billion share repurchase program. The repurchase of an additional $6 billion of Class A Common Stock is expected to be completed in the next 12 months.

Mr. Murdoch continued, “This significant return of capital underscores the Company’s ongoing commitment to disciplined capital allocation and returning value to shareholders in a meaningful way.”