Independent Franchise Partners, a London-based investment firm and one of the largest non-Murdoch holders of both News Corp and Fox, said it told a special committee of News Corp’s board last month that it thinks a combination on its own would fail to 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 business units.
Mr. Murdoch’s family trust controls roughly 40% of the voting rights of both companies. Both have dual-class structures, with the family trust mainly holding class B shares, which have more powerful voting rights.
News Corp, in addition to owning The Wall Street Journal, the Times of London and HarperCollins Publishers, is a major player in online real-estate listings through Realtor.com and other properties. It also owns Australian cable-television network Foxtel.
Another shareholder, Irenic Capital, has also publicly questioned the deal and has pushed the company to consider separating its digital real-estate assets and Journal parent Dow Jones. Some other News Corp shareholders are aligned with that view, according to people familiar with the matter.
Opposition to the deal has the potential to complicate Mr. Murdoch’s plans to realign his family holdings.
News Corp has said a majority vote of the stock of non Murdoch-family shareholders is required for the deal to go through.
In October, Mr. Murdoch proposed a recombination of News Corp and Fox, owner of the Fox News cable channel among other properties, without providing details such as a price. Special committees of the boards of both companies are examining the proposal.
Spokespeople for the companies and the News Corp special committee declined to comment.
The rationale behind the move is to take advantage of bigger scale to pursue acquisitions, compete for digital ad spending and pursue a sports-betting business, people familiar with the proposed deal have said. Some of the people have also cited cost savings from having a single corporate structure.
Both companies have struggled to excite shareholders. Shares of News Corp are down more than 20% this year and trade not much above their debut price from 2013. Fox shares are similarly depressed.
In a statement to the Journal, Independent Franchise Partners said a “straight equity exchange between Fox Corp. and News Corp would dilute and delay the realization of News Corp’s substantial intrinsic value.”
The investor holds a roughly $700 million stake in News Corp, with around 7% of the A shares and 6.6% of the B shares. It also holds 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., holds a roughly 2% stake in News Corp’s B shares.
Independent Franchise Partners was founded in 2009 by a group of former Morgan Stanley Asset Management employees and manages around $15 billion. The firm has stakes in
Bristol-Myers Squibb Co.
Philip Morris International Inc.
The firm is run by a team of portfolio managers and rarely goes public with its views, preferring to work directly with company management. One exception was in 2019 when it launched a campaign to make changes at Japanese beermaker
Kirin Holdings Co.
Independent Franchise Partners has held News Corp shares since 2017 and was a long-time shareholder in 21st Century Fox, as Fox Corp. was previously known.
The investment firm has advised News Corp behind the scenes since at least July 2020 on ways to reduce what it sees as undue corporate complexity. The firm has met in the past with News Corp co-Chairman and Fox Chief Executive
and News Corp Chief Executive
according to people familiar with the matter.
Among the investment firm’s suggestions has been to sell News Corp’s online real-estate businesses. It also asked the company in 2020 to abandon a so-called poison pill, which would have blocked outsiders from bidding for the company or pushing for a breakup. The company removed the provision last year.
The asset manager isn’t opposed to recombining Fox and News Corp, but only if it is done so in a way that News Corp shares are valued at more than $30, it said. News Corp shares currently trade at around $18. The only way to do this, it believes, 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, highly valuable but disparate assets.” It calls the Dow Jones unit, which includes the Journal, a “rare combination of trophy asset and extraordinary business” and believes it could attract substantial bids on its own.
Mr. Murdoch divided his holdings in 2013. Newspapers and book publishing went into News Corp, while most of the television and film assets went into what eventually became known as Fox Corp.
The idea behind the split was to hive off the newspaper titles, which were seen as slower-growing and more troubled than the highly profitable entertainment businesses, especially Fox News. News Corp at the time was sorting through legal troubles at its flagship U.K. newspaper division and paid hundreds of millions of dollars in settlements related to a phone-hacking scandal.
In 2018, Mr. Murdoch agreed to sell Fox’s movie studio and other entertainment properties to Walt Disney Co. in a deal valued at $71.3 billion. It left Fox as a much smaller company focused around 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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