The Murdochs have a problem. They want their family-controlled media companies News Corp and Fox Corp to make up. But the companies’ largely institutional shareholders want a break-up.
They’re operating on conflicting timetables: the instos — the institutional fund managers — are thinking quarter by quarter; the Murdochs are thinking on the dynastic cycle of generations.
For the instos, it’s about maximising value right now. For the Murdochs (or at least for the six children) it’s the dilemma all families face sooner or later: how to clear out all the knick-knacks that Dad has collected over a lifetime.
The solution the family came up with back in October was to put back together the disparate media interests held in two separate companies (News Corp and Fox Corp) since 2012. One company could more simply be sold as a whole or handed over to eldest son Lachlan to manage on their behalf.
Now, instos say no. As Crikey reported this week, the fund managers reckon there’s more money to be made by breaking up the companies, particularly the News Corp part.
Problem is, as any watcher of Antiques Roadshow knows, in any family’s collection of cherished heirlooms there’s a mix of timeless value and tired tatt. Same with News Corp.
The most valuable bit is the real estate advertising business, already held in an autonomous company, the REA Group. Its $16.3 billion market capitalisation values News Corp’s controlling 60% share at about $10 billion.
Next comes The Wall Street Journal and associated assets. Rupert’s last big buy-back in 2008 makes money and brings a certain New York social cachet. The nearest comparator, The New York Times, is priced by the US stock market at about $9 billion.
Then comes HarperCollins, one of the big five global book publishers. Right now, Paramount, as part of the Redstone family’s own succession shake-up, wants to sell its “non-core asset” Simon & Schuster. Its preferred buyer at about $3.3 billion was the largest of the five, Bertelsmann-owned Penguin Random House. This was knocked out by US courts on competition grounds, but the instos do love industry consolidation. In their world, having five competitors just seems wasteful.
Australia’s own Foxtel is being squeezed by the giant streamers. News Corp has been trying to find a window to float its video interests for about seven years. Its minority partner Telstra is even keener. Yet somehow that window always seems a “next financial year” project.
Finally, the news media — the Australian mastheads plus the New York Post and London’s Sun and Times. Whatever they’re worth, much of it will be offset with the liabilities for the sooner-or-later print closures that come with it. Nine virtually gave away its New Zealand newspapers in 2019 while the New York Post’s competitor, The Daily News, was sold with liabilities for just one dollar in 2017.
But these mastheads deliver that crucial Murdoch political clout — for whatever that’s still worth in the wake of last weekend’s Victorian election and the rolling implosion of the British Conservative Party.
No wonder the instos reckon they can get more out of a break-up of News Corp than they can with a News/Fox merger that locks in the current $16.6 billion market value of the company.
For the family, it’s about estate management. Once the Fox entertainment assets were merged with Disney in 2018 and second brother James left the businesses in 2020, the family matured into the passive wealth management phase of the dynastic life cycle.
The Murdochs are not even majority shareholders in their own companies — control comes through the US peculiarity of voting and non-voting shares. Their media interests are a small part of the family assets.
Assuming they’ve kept most of the Disney shares they received in exchange for the assets (neither Disney nor the Murdochs have indicated either way) their personal cash flows are far more dependent on the frustratingly suspended Disney dividend flow.
None want the media. They want the money. The media assets might be dwarfed by their Disney jackpot, but it’s still worth about $5 billion. Even split among the already billionaire children it’s not to be sneezed at.
To believe in a seamless Lachlan succession is to believe that the other three who, with Lachlan, have the votes on the family trust, will be happy to leave the share of this money for their elder brother to play with post-Rupert. Hmm, looks like a break-up is coming sooner or later.
Now that the merger looks like it’s off the table, expect it sooner. And that’s bad news for its declining Australian arm.
