(Bloomberg) — Rupert Murdoch’s plan to combine News Corp and Fox Corp, and re-create the conservative-leaning media he split from nine years ago, drew mixed reactions on Wall Street.
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Several analysts said the potential recombination is unlikely to solve one of the main problems facing Fox and News Corp – low ratings compared to their peers. While News Corp. 3.4% Amid a broad market rebound, Fox Class A shares fell 9.4% in the biggest drop since March 2020.
The two companies said Friday that the 91-year-old patriarch of the global media empire is seeking to reunite the parent company of Fox News with those of the Wall Street Journal and the New York Post. His family trust holds about 40% of each company’s voting shares, and reintegrating them will save company expenses and allow the larger entity to more easily promote new businesses, such as sports betting, across multiple media outlets.
For Fox, Benjamin Swinburne wrote at Morgan Stanley, the advantage of “greater synergies in scope and modest cost is largely offset by increased complexity”. As for News Corp, fellow Andrew MacLeod said there is a “strategic advantage in a potential merger” but the timing of any asset sales or subsidiary operations will be critical.
So far no one from the Murdoch clan, which includes Robert’s six sons, has spoken publicly about the deal. The move is likely to consolidate power in the hands of his son Lachlan Murdoch, 51, the current CEO of Fox. Son James Murdoch, a former executive at the family media empire, resigned from News Corp’s board of directors in 2020, over disagreements over news judgment and strategy.
Rupert Murdoch and his family trust proposed the merger on their respective boards. The majority of non-family shareholders will have to agree, and that may give an opportunity for anyone who opposes the deal to speak up. Special committees of independent directors will explore potential terms and there is no certainty of a deal.
Lachlan is the favorite to eventually take over the entire Murdoch empire. James, whatever his concerns about the organization’s policies, will not be able to do much to stop the merger if he wants to. But as a prominent family member, his opinion can carry weight with shareholders. James Murdoch declined to comment.
Kanan Venkateshwar, an analyst at Barclays plc, said in a research note on Sunday that he found the proposal “a head scratcher”. Neither company has complementary businesses and the deal is unlikely to change what has been a historical antagonist imposed on Murdoch’s media empire, relative to its peers, he wrote. Both companies are trading at just over six times their 2023 earnings before interest, tax, depreciation and amortization.
Separately, Irenic Capital Management would prefer to break up News Corp.’s media outlets. and real estate listings, according to a person familiar with the matter, confirming a report in the New York Times on Sunday night. The Activist Fund owns a stake of $150 million in the company and is one of the 10 largest holders of Class B shares, which includes voting rights.
Irenic and associates have dealt with the Murdoch family and believe that the News Corp. It could unlock the value, considering the company is trading at a huge discount on the sum of the parts valuation which should be about $34 a share, the person said. The person added that Irenec was willing to oppose a deal that would reduce the value of News Corp.
POSSIBLE BENEFITS
While the combination of Fox and News Corp. “is not an overly obvious deal,” analysts at Wells Fargo & Co. said. Merging the two companies could provide synergies in content and programming. UBS Group AG has also indicated that US News Corp divisions such as Dow Jones and the New York Post may benefit from cross-promotion with Fox TV companies, while there may be potential synergies with Fox’s cable network division.
“If we learn one thing from analyzing Murdoch’s assets historically, it is that the family looks to maximizing value and is not emotionally attached to any property,” Wells Fargo analysts including Stephen Cahal and Wojtek Majerczak wrote in a note on Sunday.
Rupert Murdoch usually finds his way into the work he began building seven decades ago. He is Chairman of the Board of Directors of Fox and CEO of News Corp. He also has the largest share of votes in the family’s trust, which includes a saying to his four oldest sons: Lachlan; mosques; and two daughters, Prudence and Elizabeth.
family dynamics
The family’s inner feuds, which served as the inspiration for the HBO series “Succession,” are well chronicled.
James, 49, and his wife, Catherine, have criticized the empire’s coverage of issues such as climate change. Katherine is on the board of 19, a news organization dedicated to women’s issues and public policy, and they helped fund Bulwark, an anti-Trump conservative news outlet. They are also a major donor to Democratic candidates.
Meanwhile, Lachlan defended the split of the two companies in a 2019 presentation to investors. Spit, he said, allowed the company to return to its roots as “an agile, creative, entrepreneurial, and at times paradoxical company.” He even went so far as to say that he “sees no sense in reversing the benefits of those specific verbs”.
His thinking has changed, according to people familiar with the company’s plans. The media landscape has shifted with more consumers viewing content online. Developed by Fox and News Corp. their digital offerings in recent years, and Lachlan believes he can use both traditional and new media to launch and promote businesses in the future.
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