Media baron Rupert Murdoch abandoned his plans to merge Fox Corp and News Corp, the two media companies he controls.
Both companies said their board of directors received letters from Murdoch “withdrawing the proposal to explore a potential combination of News Corp and Fox Corporation.” Together with his eldest son Lachlan, Murdoch determined that combining the two entities “is not optimal for shareholders” of either company at this time.
Fox operates news channels Fox News, Fox Sports, and Fox TV Stations. News Corp is the parent of publications such as The Wall Street Journal, New York Post, and publisher HarperCollins. The Murdoch family owns about 40% of both companies. The Special Committees set up at both firms to explore the potential merger have been dissolved.
Murdoch had pursued a merger as a way to secure a bigger resource pool for further acquisitions, but investors saw little merit in overcomplicating a swelling business instead of simplifying it.
They welcomed Murdoch’s change of heart. “This is the right decision,” said Adam Katz, co-founder and chief investment officer at activist investor Irenic, which owns 2.6% of the class B voting shares of News Corp.
When the talks started, Irenic was among the first companies to object to a merger, suggesting that a spin-off of News Corp’s digital real estate business or Dow Jones was a better option.
Soon after, Independent Franchise Partners, a bigger investor that owns 7% of News Corp’s Class A shares and 6.4% in Fox Corp, also pushed back on the deal in November. Then, T. Rowe Price, which owns almost 18% of News Corp, joined the growing chorus opposing the deal.
“It’s more constructive to help form the process than try to push back against any proposal once it’s been made,” Vincent DeAugustino, one of the portfolio managers who oversees T. Rowe’s investment in News Corp, said at the time.
“Every investor I’ve spoken to in the last 10 years on News Corp has expressed that they think the company is way too complicated and should be simplified by selling assets or spinning off assets. Putting the two (News Corp and Fox) together makes no sense to us.” —Craig Huber, media analyst at Huber Research Partners.
June 2013: Murdoch splits his $75 billion (at the time) News Corp into two—one is the loss-making publishing arm that retains the name, and the other is the more profitable Hollywood studio 21st Century Fox.
March 2019: Murdoch sells 21st Century Fox to Disney for over $71 billion. The deal included movie production arms 20th Century, TV studios, a range of Fox’s cable channels, its 30% share of Hulu streaming, and more. Fox retained its news channel, sports channel, and a handful of others.
October 2022: Murdoch writes letters to the boards at Fox and News Corp, asking them to consider a merger. The reunited entity would be worth around $26 billion, putting it in the league of Warner Bros Discovery, albeit far behind behemoths like Disney and Comcast.
When talk of the merger started, rumours swirled about 91-year-old Murdoch’s succession planning to consolidate power behind his son and Fox head Lachlan. But the company issued a staunch rebuttal.
“The proposal is 100% based on business rationale. Any commentary that implies it has to do with succession planning is absurd and comes from sources with no knowledge of the strategy,” a spokesman for Murdoch told Reuters in November.