After trading ended on Friday, the market was surprised by news that Rupert Murdoch is exploring a recombination of Fox Corp and News Corp just over 9 years after he engineered the split in the family empire.
The Murdoch-owned Wall Street Journal reported the story on Friday and said the two companies had set up special board committees to study a possible deal and evaluate potential financial terms.
The Journal said the discussions are at an early stage and there is no certainty the 91-year-old Murdoch will go through with the deal.
The story saw News Corp shares rise 5% in afterhours trading to $US16.40 and Fox Corp (voting) shares fall 1.3% to $US28.77.
In Australia the News Corp certificates of Deposit finished at $25.90 on Friday on the ASX and will no doubt jump sharply today.
Murdoch split his empire in June 2013, housing the newspaper publishing business and Foxtel under News Corp and TV and film assets under 21st Century Fox, which eventually became Fox Corp after much of the business was sold to Disney in exchange for shares which are reportedly still held by the Murdoch Family Trust.
The Murdoch Family Trust, which is based in Reno, is the holder of shares in Fox Corp and News Corp that total around 14%-15% of total issued capital in both companies but hold between 42% of the voting shares in Fox and 38% of the voting shares in News Corp. Both companies have two classes of shares – voting and non-voting.
News Corp has been boosted in recent years by the strong performance of its 61% owned Australian real estate listings business, REA and its 100% owned US version called Move (which controls Realtor).
And while the newspaper operations in Australia and the UK have shrunk and lost revenue and billions of dollars since the split because of impairments, the Wall Street Journal owner, the Dow Jones Co has flourished and is now a rapidly growing breakout business that has overtaken News Corp Australia and the UK business in terms of profitability and growth.
News Corp has also moved to a 65% ownership of Foxtel, the Australian Pay TV and streaming business which underwent severe cost cutting in 2020 but seems to on a slow recovery. News also controls Harper Collins, the New York Post.
Fox Corp’s big assets are the right-wing cable news arm Fox News and the Fox TV network.
Fox’s market value at June 30 was $US16.8 billion and News Corp’s value was $US9.4 billion. REA is valued at $US9.17 billion ($A14.8 billion) as at last Friday. In other words, the market thinks the Wall Street Journal, News Corp Australia and the UK papers and 65% of Foxtel are worth very little.
To have any chance of success any deal would have to value the combined companies at more than $US30 billion and a fat premium to the $US26.2 billion combined value at Friday’s close.
Even with a $US30 billion valuation, a combined Murdoch empire company would be far behind Netflix ($US102 billion), Comcast, $US133 billion – it owns NBC Universal, Sky in the UK and huge cable TV businesses in the US; Warner Discovery, worth $US30.3 billion and be dwarfed by Disney with its $US176 billion value as of Friday.
But because it is in the media, it is also competing with Alphabet (Google) worth $US1.3 trillion, Meta (Facebook), $US350 billion; Amazon ($US1.15 trillion) and Apple ($US2.3 trillion).
Murdoch, 91, split Fox and News Corp in 2013. He is the chairman of Fox and the executive chairman of News Corp. His son Lachlan Murdoch is CEO of Fox and co-executive chairman of News Corp. Another son, James Murdoch, left the business in 2021, and daughter Liz departed years ago after creating a content company and selling it to News for more than $US600 million.
