Independent Franchise Partners, a London-based investment firm and one of the largest non-Murdoch owners of both News Corp and Fox, said it told a select committee of News Corp’s board last month that they believe a Combination alone can not realize the full value of the company. It believes any combination should be done in conjunction with the sale of some of News Corp’s most valuable businesses.
Mr. Murdoch’s family trust controls approximately 40% of the voting rights of both companies. Both have dual-class structures, with the family trust holding primarily class B shares, which carry stronger voting rights.
News Corp is a major player in online real estate listings through Realtor.com and other properties, along with The Wall Street Journal, The Times of London and HarperCollins Publishers. It also owns the Australian cable television network Foxtel.
Another shareholder, Irenic Capital, has also publicly questioned the deal, urging the company to consider a divestment of its digital properties and journal parent Dow Jones. Some other News Corp shareholders agree with that view, according to people familiar with the matter.
Opposition to the deal could complicate Mr Murdoch’s plans to reposition his family holdings.
News Corp has said that a majority vote of shares held by non-Murdoch family shareholders is required for the deal to go through.
In October, Mr. Murdoch proposed a recombination of News Corp and Fox, owners of the Fox News cable channel and other properties, without giving details such as a price. Special committees of the boards of directors of both companies are examining the proposal.
Company and News Corp special committee spokesmen declined to comment.
The rationale behind the move is to use the larger scale to make acquisitions, compete for digital ad spend and operate a sports betting business, people familiar with the proposed deal said. Some of the people have also cited cost savings from a single corporate structure.
Both companies are struggling to please shareholders. News Corp’s stock is down more than 20% this year and is trading not much above its 2013 debut price. Fox shares are similarly depressed.
In a statement to the Journal, Independent Franchise Partners said that “a direct stock exchange between Fox Corp. and News Corp would dilute and delay the realization of News Corp’s significant intrinsic value.”
The investor owns around $700 million in News Corp, with around 7% of the A shares and 6.6% of the B shares. It also owns around 6% of Fox’s A shares.
Irenic, which was co-founded by Adam Katz, a former employee of hedge fund giant Elliott Management Corp., owns around 2% of News Corp’s B shares.
Founded in 2009 by a group of former Morgan Stanley Asset Management employees, Independent Franchise Partners has approximately $15 billion under management. The company has an interest in Bristol-Myers Squibb co
Philip Morris International inc
and microsoft corp
The firm is run by a team of portfolio managers and rarely publicizes its views, preferring to work directly with management. An exception was in 2019, when it launched a campaign to make changes at Japanese beer maker Kirin Holdings co
Independent Franchise Partners has held shares in News Corp since 2017 and was a long-time shareholder of 21st Century Fox, as reported by Fox Corp. used to be called.
The investment firm has been advising News Corp behind the scenes since at least July 2020 on ways to reduce what it believes to be unreasonable corporate complexity. According to people familiar with the matter, the firm has met in the past with News Corp co-chairman and Fox chief executive Lachlan Murdoch and News Corp chief executive Robert Thomson.
The investment firm’s proposals included the sale of News Corp.’s online real estate business. It also urged the company in 2020 to abandon a so-called poison pill that would have prevented outsiders from bidding for the company or pushing for a breakup. The company removed the provision last year.
The money manager isn’t opposed to a Fox-News Corp recombination, but only if it does so in a way that values News Corp’s stock at more than $30, it said. News Corp shares are currently trading at around $18. The only way to do that is to sell News Corp in parts.
“A single buyer doesn’t make sense to us,” the investment firm said in its statement. “News Corp contains unique, very valuable, but distinct assets.” She calls the Dow Jones entity, which includes the Journal, a “rare combination of trophy value and exceptional business” and believes it could attract significant bids of its own .
Mr Murdoch split his holdings in 2013. Newspapers and book publishers went to News Corp, while most of the television and film assets went to what eventually became known as Fox Corp.
The idea behind the split was to spin off the newspaper titles, which were seen as slower growing and more problematic than the highly profitable entertainment companies, particularly Fox News. News Corp, at the time, was solving legal problems at its flagship UK newspaper division and paying hundreds of millions of dollars in settlements related to a phone-hacking scandal.
In 2018, Mr. Murdoch agreed to sell Fox’s film studio and other entertainment properties to Walt Disney Co. for $71.3 billion. Fox remained a much smaller company focused on Fox News and sports channels.
—Jeffrey A. Trachtenberg and Jessica Toonkel contributed to this article.
write to Alex Frangos at [email protected]
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