What’s happened at News Corp, the Murdoch family’s second media arm?
After years of gloom and doom, suddenly it’s all sunny in the Garden of Murdoch with the past five days seeing three deals announced worth more than a billion Aussie dollars on major non-print expansion in finance, property and book publishing.
On Monday REA Group, 61% controlled by News Corp announce an agreed $A244 million ($US186 million) bid for Mortgage Choice to expand the size of its mortgage broking business.
While its listing business is doing well from the current boom in interest in homes and surge in prices, the Murdoch family controlled-News Corp wants REA to deepen its involvement with customers past the sales stage.
Mortgage Choice will be run as a separate part of REA.
And then around 6 hours later it became known that News Corp was buying the consumer book business from US publisher Houghton Mifflin Harcourt.
That deal will add a portfolio of high-profile novels from authors such as George Orwell, Philip Roth and J.R.R. Tolkien to News Corp’s HarperCollins Publishers division, as well as Mills and Boon romances and the Bible.
The cost is $US349 million ($US457 million)
Both deals came only days after news returned to the takeover trail with the $US275 million ($A360 million) purchase of the financial website and associated business, Investors Business Daily.
It will be slotted into the fast-growing website business.
And yet on Monday we learned that News Corp had written to newsagents in western Queensland (West of a line between Carters Towers and Emerald) telling them that from September 26 they will no longer get the Murdoch clan’s titles like Brisbane’s Courier Mail or The Australian because it cost too much to send them there.
ABC News reported that in its letter to newsagents, News said its decision was based on “the very high cost to distribute to your region, in the context of how people access their news today, [which] makes its continuation unsustainable”.
The return to acquisitions at News came out of the blue and belies the constant mantra of the past five years of cut, cut, sell, sell.
It is as though someone has thrown a switch in the HQ on the Avenue of the Americas in New York from full steam astern to buy, buy, buy.
It was as though we have return to the time after the great Murdoch empire split in 2013, which was made to distant the tainted newspapers, especially in the UK from the Murdoch ambitions to grab total control of Sky Broadcasting and dominate news and entertainment across Europe.
That didn’t happen after UK regulators gave the Murdochs the thumbs down, but that didn’t stop Rupert as chair and Robert Thomson as CEO of News from going on a spending spree.
They bought assets here and there – a bible publisher, a bodice ripper/romance publisher from Canada, digital ad companies, UK radio, Australian regional newspapers and more of Foxtel in 2018. Then the financial pains hit the fan and News Corp – board and CEO – were forced to backpedal as fast as they could to unload non-performing assets, people, close newspapers, sell off underperforming or unprofitable assets (even paying a couple of buyers to take some of the duds of their hands – video ad business, Unruly springs to mind.
News America Marketing, a pre-split purchase driven by Rupert and previous management was sold in 2020 with the buyers effectively being paid around $US50 million to take the dud off the News Corp balance sheet.
The company’s newspapers were shredded with thousands of jobs slashed – mostly in Australia – in several waves of cuts. The UK and US operations at the New York Post and the Wall Street Journal lost jobs, but nowhere near as many as Australia. Foxtel was bailed out when it couldn’t repay huge bank debts when they fell due and hundreds of jobs cut during the 2020 pandemic.
And suddenly, at the end of March 2021, all the doom and gloom at News changed and in the space of five days, the wallet was opened and three major purchases revealed – with an expensive price tag.
And yet all this spending might not had happened if Robert Thomson had succeeded in buying book publisher, Simon & Schuster from ViacomCBS last November. Instead german giant, Bertlesmann (owners of Penguin Random House) paid $US2.2 billion Simon & Schuster, a move that saw Thomson go off on another of his now regular diatribes:
“There is clearly no market logic to a bid of that size – only anti-market logic. Bertelsmann is not just buying a book publisher, but buying market dominance as a book behemoth. Distributors, retailers, authors and readers would be paying for this proposed deal for a very long time to come. This literary leviathan would have 70 percent of the US Literary and General Fiction market. There will certainly be legal books written about this deal, though I wonder if Bertelsmann would publish them” he was quoted in a press release dated November 25, 2020.
So had News forked out $US2.2 billion (and it couldn’t, it didn’t have enough money and was under pressure supporting floundering Foxtel with hundreds of millions of dollars of shareholder loans), it would not have been able to buy IBD and REA Group would have found it hard to bid for Mortgage Choice because News Corp’s bankers would have been reluctant to allow valuable cash to be used.
And it would not have had the $US349 million for its latest deal. As it is News, in its three latest deals, has spent around half the $US1.6 billion in cash it had on hand at the end of December (and a standby $US750 million revolving line of credit that has yet to be used).
News Corp’s share price has risen sharply this year – up nearly 32% this year in the wake of deals with Facebook and Google and solid subscriber numbers for Foxtel’s Kayo and Binge streaming services.
