News Corp investors worried about proposed merger with Fox

News Corp investors worried about proposed merger with Fox

An activist investor stepped up pressure on News Corp on Sunday, asking it to reconsider a proposal by Rupert Murdoch to combine the two parts of his media business, News Corp and Fox.

The investor, Irenic Capital Management, said in a letter to News Corp, which was seen by The New York Times, that it may vote to oppose the merger, arguing that the proposed deal is likely to be under -evaluate News Corp.

“We want to be clear: walking away from a potential transaction is better than accepting a deal that does not maximize the value of News Corp,” Irenic said in the letter, which was addressed to the special committee of independent members. of the board evaluating the merger proposal. .

Irenic owns about 2% of News Corp’s Class B shares, according to the letter. These shares carry higher voting rights than the more numerous Class A shares.

Along with the letter, Irenic sent an email asking to meet with the special committee to share her views and those of other shareholders.

This is the second time that Irenic has asked for a meeting. Last month, Irenic did so by urging News Corp to consider separating its online real estate listings unit from its other businesses, including the Wall Street Journal, HarperCollins and the New York Post. He said in his Sunday letter that he also wanted News Corp to consider divesting its Dow Jones media properties. The company says News Corp shares, which currently trade at $18 a share, could be worth $34 a share. He is advised by executives including Jon Miller, former Chief Digital Officer of News Corp.

The letter aims to pressure the special committees that Fox and News Corp have appointed to assess Mr. Murdoch’s proposal. He has a say in the matter: The Murdoch Family Trust, which Rupert Murdoch controls with his eldest children, has about 40% of the votes at Fox and News Corp thanks to its more powerful Class B shares. But any deal requires the approval of a majority of investors who are not part of the Murdoch trust.

Irenic isn’t the only News Corp investor asking questions. Will Granger of Airlie Funds Management said in an interview that he was not convinced the two companies would be better off together.

“We don’t see a lot of business rationale for the deal,” Granger said. “Does the Wall Street Journal benefit from linking Fox to it? It’s not obvious to me. »

Airlie has a small stake in News Corp’s total equity base, Mr. Granger said. His argument was similar to Irenic’s, saying Airlie would not support a merger unless Fox paid a significant premium to News Corp’s stock price or completed another transaction at the same time, such as selling real estate business of News Corp.

News Corp’s major minority shareholders T. Rowe Price and Vanguard Group, which collectively own about 20% of the company’s Class A shares, did not respond to a request for comment.

News Corp declined to comment.

The deal between News Corp and Fox, if it goes through, could bring together a collection of news and entertainment assets including Fox News, The Wall Street Journal, the Fox Broadcast Network and TMZ under the same umbrella. Mr Murdoch said he sees opportunities for savings and earnings by joining the two companies, including ways to use the company’s assets for the two companies’ emerging lines of business, such as betting sportsmen.

Since the split of the two companies in 2007, the industry has gone through a wave of consolidation to compete with streaming giants like Netflix and combat the decline of the traditional TV business.

“Scale is important,” Lachlan Murdoch, the chief executive of Fox and Rupert Murdoch’s eldest son, said in November. “The ladder provides flexibility in many ways.”

The proposal would divide ownership among shareholders based on each company’s market value, although it does not suggest a valuation proposal for the companies.

The move came as a surprise to some in the media industry, as Rupert Murdoch once argued that his assets were better off in separate companies.

In a note to investors last month, analyst firm MoffettNathanson said it expected Fox to sell someday, “but not like this!” The memo said MoffettNathanson was concerned that raising assets could confuse investors, affecting the value they place on a merged company.

News Corp shares are down about 20% in the past year, giving it a market valuation of $10 billion. Fox shares are also down about 20%, giving it a market valuation of $16 billion.

Benjamin Mullin contributed report.

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