Rupert Murdoch’s proposed plan to reunite News Corp And Fox is facing opposition from one of the major shareholders of both companies, Independent Franchise Partners.
The London-based firm believes other alternatives should also be explored, such as dissolving News Corp. It also believes a recombination would not realize the company’s full value, a spokesperson confirmed to CNBC on Wednesday, following an earlier Wall Street Journal report.
Independent Franchise Partners is a major shareholder of News Corp and Fox that is not Murdoch. It holds about 7% of Class A shares and more than 6.5% of Class B shares of News Corp, as well as about 6% of Class A shares of Fox, according to FactSet.
The Murdoch family trust controls about 40% of the voting rights of both companies. Murdoch split the companies in 2013 and remains chairman of Fox and executive chairman of News Corp, while his son Lachlan Murdoch is chief executive officer of Fox and co-executive chairman of News Corp.
Representatives for News Corp and Fox declined to comment on Wednesday. During a recent earnings call with investors, Fox said there has been no update from the special committee regarding the proposed transaction. There is no certainty that the merger will take place.
Last month, News Corp, which owns Wall Street Journal publisher Dow Jones, announced it had formed a special committee of board members to consider a possible deal. The proposal would once again merge the company with Fox, which was left over from the $71.3 billion sale of Twenty First Century Fox to Disney in 2019. Fox owns right-wing television networks Fox News and Fox Business, which is a competitor of CNBC.
What is Murdoch thinking
The combination of the two companies would allow Murdoch to consolidate leadership in his media empire and cut costs at a time when audiences are shrinking for both print and cable TV while readers and viewers receive more and more news from other channels, such as social media, online and streaming services.
The thinking behind the meeting is that it would simply give the merged company more scale to compete at a time when media companies are competing for subscribers and digital advertising spend, people familiar with the matter said. , who declined to be named.
A merger would also allow some assets, such as Fox’s ad-supported streaming service Tubi, to easily enter the UK and Australian markets and open it up to more business opportunities for sports betting, they said.
Also, while that’s not the rationale behind the proposal, a combined company would also have more firepower to make acquisitions, as well as a better ability to return capital to investors at a faster rate, the people added.
Independent Franchise Partners told the Journal that a direct stock swap between Fox and News Corp would dilute and delay the realization of News Corp’s substantial intrinsic value.
The firm would not oppose a recombination as long as it was done in a way that sees News Corp’s stock valued at more than $30. However, it believes the only way to know the stock price is to sell shares of News Corp, which was trading at around $18 on Wednesday.
This isn’t the first non-Murdoch shareholder to reject the proposed deal. Earlier this week, Irenic Capital Management said it had sent a letter to the special committee saying Fox has failed to serve News Corp’s strategic goals and, as an Independent Franchise, it believes News Corp’s stock is undervalued.
Irenic, which owns about 2 percent of News Corp’s Class B voting stock, said the company is undervalued and instead prompted the special committee to consider spinning off its digital and Dow real estate businesses. Jones.
Selling these assets would be more difficult than merging the two companies, the family members said, and the individual businesses could lose the advantage of being part of a larger company.
An Irenic spokesperson did not comment further, but pointed to an analyst’s comment on the proposed transaction.
“Every investor I’ve spoken to over the past 10 years on News Corp has said they believe the company is too complicated and should be simplified by selling assets or by spinning off assets,” said Craig Huber of Huber Research Partners. “Putting the two together doesn’t make sense to us. … The problem is, they haven’t gone far enough since separating News Corp in 2013.”
Airlie Funds Management, which owns a small stake in News Corp, also said it doesn’t think combining the two companies would add value, The New York Times previously reported, and wouldn’t support a merger unless Fox pays a significant premium to News Corp’s stock price or made another deal at the same time, such as selling News Corp’s real estate assets.
Class A shares of Fox traded slightly higher Wednesday, while Class A shares of News Corp were up 3%. Fox’s market value is nearly $17 billion, while News Corp’s is over $10.5 billion.