Fairfax Media’s split will now put pressure on News Corp — one of the two companies in the Murdoch clan’s media empire — to also split, even though the Murdochs control it with a 39.1% stake (including 2 million shares held personally by Rupert Murdoch). But owning their various papers (and Sky News in Australia) allows the Murdochs to terrorise governments here, in the UK and the US (where Rupert Murdoch has cosied up to Donald Trump and become a bestie through Fox News, owned by 21st Century Fox). That makes Rupert a non-seller. There is nothing more intransigent than a fading media mogul with access to politicians.
But more investors want a split in News Corp, starting with Perpetual, the big Sydney-based investment group, which has boosted its stake in News Corp’s B-class voting shares to 12%, second after the Murdoch clan’s 39.1% (including Rupert Murdoch’s personal holding of a couple of million). At the time of the issue of News’ proxy statement last October, Perpetual owned 10.2%, or 20,454,830 B-class shares.
Last week, Perpetual further cemented its position as the second biggest holder of the voting shares in the Murdoch clan’s News Corp. In a filing with the US Securities and Exchange Commission, News said Perpetual had lifted its stake by more than 3.5 million shares in the past three months to a new high of 23,955,085 shares, a stake of 12%. It spent over A$45 million on building its stake Perpetual’s stake is worth more than A$400 million, and it is not a passive investment. In fact, News Corp’s papers have never discussed the aims of the Perpetual holding and want what the firm wants.
But its target is to split the company, as a senior Perpetual fund manager told his investors midway through 2016, and force News to hive off the Australian (REA Group) and US (Move) online property websites away from the weak newspapers (especially in Australia) and pay TV (Foxtel and Fox Sports). REA was valued at A$7.26 billion at the close Tuesday, News Corp at A$10.03 billion. News Corp owns 61% of REA, meaning its net stake is worth A$4.4 billion or more than 40% of News Corp’s total value.
Last July, in a letter to unit holders in its Pure Equity Alpha Fund, Perpetual said the REA Group stake represents 70% of the value of News Corp. And Perpetual pointed out that one of the oddities of News Corp is that its print assets have a negative value of about $731 million.
Huber Research of the US also sees the need for News Corp to split off some or all of its assets, as it told clients last month. Principal Craig Huber asked a question based on this note of News Corp CEO Robert Thomson on the results teleconference with analysts earlier this month. Thomson failed to address Huber’s points, only saying News was a company “in transition”. Perpetual and Huber, though, think otherwise. — Glenn Dyer
Fairfax splits, many think News Corp should follow, but will stubborn old Rupert allow it? No, not whilst canny accounting practices can attract large amounts of corporate welfare from a cash strapped LNP government.