Rupert Murdoch and his six kids are in line for billions of dollars ($US2 billion each for the six children, led by James, Lachlan and Liz Murdoch) from Disney’s $US71.3 billion bid for 21st Century Fox and the dismembering of the empire and creation of a new Fox company based on the Fox News Channel.
But very quietly shareholders in Argo Investments, Australia’s second largest investment company stand to share in an $A100 million bonanza, all thanks to the Murdoch males and their decision to sell to Disney and split Fox.
Whether shareholders get all of that or the company reinvests the gain back into the markets hasn’t been mentioned by the company in speeches yesterday to Argo’s annual meeting in Adelaide.
Argo, an Adelaide-based listed investment company (or LIC) has been a long time backer of Rupert Murdoch, taking a stake in News Ltd in 1993 and then keeping it as Murdoch took his company to the US 14 years later and then broke it up in 2013.
Argo stuck with 21st Century Fox even though it wasn’t listed on the ASX from mid-2013 when the split into two companies (News Corp was the other) started.
“Since this time, traditional media companies globally have de-rated as Netflix and other mediums, including social media platforms like Facebook, grew their user numbers and eyeballs.
“While we were always likely to sell this holding at some time because Fox was no longer listed on the ASX, we knew the business well and while the share price was doing little, earnings continued to increase.
“We also were relatively confident that we would see a weaker Australian dollar, which would provide a much better time to realise any sale in Fox,” CEO Jason Beddows told Argo shareholders yesterday.
Mr. Beddows told the meeting “pre-tax proceeds of around $100 million (will be) coming from this investment.” The Aussie dollar’s fall of 8% this year to around 71 US cents has obviously helped finalise the sale timing for Argo
At June 30 this year 21st Century Fox had a 1.7% share of Argo’s investment portfolio, or $102 million. That means the company will see out for more than $200 million. The pre-tax profit of ‘around $100 million”.
Seeing Argo made a net profit of just over $218 million in the year to June, shareholders in the company are facing a big payday sometime this year.
Meanwhile, Mr. Beddows told the meeting that since the June 30 balance data the company has invested mainly through capital raisings.
“We participated in the capital raisings of Transurban Group to partly fund their latest acquisition, WestConnex; Rural Funds Group following their purchase of additional beef cattle properties; and Bega Cheese as they funded their acquisition of the Koroit dairy processing facility from Saputo.
“Other major purchases included adding to Boral and taking new positions in Eclipx Group and Star Entertainment. We also participated in the Viva Energy IPO.”
He said that when comparing Argo’s 20 largest equity investments, based on market values at September 30, to the same time last year, Westpac remains the largest holding, “however the other major banks have dropped down the list as their share prices have fallen. While these are significant holdings in dollar value and pay substantial dividends, Argo holds a large underweight position in the big four banks compared to the index and this has benefitted our relative performance.”
He pointed out that significant share price rises in Macquarie Group, BHP and CSL has seen these three holdings increase by over 1% of the overall portfolio.
“It must be remembered that a 1% move in the portfolio value is almost $60 million. There are two new additions to the top 20, being Transurban Group, following participation in the recent capital raising, and Aristocrat Leisure, a combination of a 37% increase in the share price over the past 12 months and some additional stock purchases.
“These companies replace Amcor, which has suffered from lower beverage volumes and increasing input costs, and AGL Energy, falling in value due to energy retailers and electricity prices being in the political firing line.”
“At a stock level, Argo’s best performers in absolute share price appreciation in the 12 months to 30 September were Santos, up over 80%, and Washington H. Soul Pattinson, CSL, Premier Investments, Macquarie Group, BHP and Computershare, all increasing in price by 40% to 60%. As always, some of these strong moves were offset by falls in others, with AMP, Automotive Holdings Group, Pact Group, and Estia Health, all falling between 20% and 30%.
“We continue to own a well-diversified portfolio, and this is illustrated by its spread across industry groups. Since this time last year, the biggest change has been the large fall in the value of the Australian banks, shrinking over 3% from last year. This has mostly been redistributed to Energy, Healthcare and Resource stocks within Materials, all increasing by over 1%,” Mr. Beddow said.
Argo shares rose 0.2% to $7.82.
