Rupert Murdoch Backtracks on Plans to Combine News Corp and Fox
Earlier this week, Rupert Murdoch, the Australian business magnate, scrapped his plans for the merger of Fox and News Corp, which he first announced in October. The two companies announced that 'the special committees' put in place to explore the terms of the merger were disbanded with immediate effect and that "the proposal did not serve the best interest of the investors of Fox and News Corp at this time".
The announcement of Murdoch's plans to merge the two companies was met with heavy pushback from investors of both companies. T. Rowe Price, a major shareholder in News Corp, openly conveyed their concerns about the proposal and suggested that a merger of the two companies would undervalue News Corp, which they believed was already trading below what it's worth. News Corp currently has a market capitalisation of $11 billion, while Fox is valued at $17 billion. Other significant shareholders, including Independent Franchise Partners and Irenic Capital, also raised concerns about the proposal. In addition to the undervaluation of News Corp, the $1.6 billion lawsuit filed by Dominion Voting System against Fox News seems to be a contributing factor to shareholders' disapproval of the plan.
This announcement has been well received by the investors of both companies, with both stocks up by 2.5%. Additionally, News Corp is pursuing a sale of Move, their digital real estate business. News Corp has been approached by CoStar, who have offered to purchase News Corp's 80% stake in Move for more than $3 billion, which is a significant premium to what they bought the business for in 2014. The sale of Move would be a step towards cleaning out the real estate holding of News Corp. According to Chris Huber, a media analyst at Huber Research, 'this would simplify the structure of News Corp, which is greatly needed as the company is overly complicated.'
Had the deal materialised, the merger would have brought together Murdoch's media empire, which he split in 2013 in order to unlock value for investors. According to people close to Mr Murdoch, the proposal was made with the rationale that the combined entity would have a greater balance sheet strength, thus allowing to pursue more acquisitions. The merger of the two companies would have improved opportunities for content creation and distribution synergies for both parties. After the split in 2013, Fox Corporation continued operating as a news, sports and entertainment company in the U.S. At the same time, News Corp diversified its operations into various segments, including digital real estate services, book publishing and news media. Currently, Rupert Murdoch and his family trust control nearly 40% of both News Corp and Fox.