Why Rupert Murdoch’s mega-deal is dead

World News

When Rupert Murdoch last year declared his ambition to potentially unite the two arms of his empire News Corp and Fox, his stated reason was simplicity. The deal is now dead – getting it done was anything but simple.

In Murdoch’s realm he is accustomed to being the dictator. So, it was a rare show of shareholder democracy when other investors appeared to defeat what was probably the 91-year-old media baron’s last big corporate reshuffle proposal.

The deal was set to pave the way for Lachlan Murdoch to more simply take control of the empire one day.Credit:Bloomberg

But this time around the non Murdoch-aligned shareholders held the balance of power because the mega-merger needed approval of the majority of independent shareholders.

Murdoch has a 40 per cent interest in the voting shares of News Corp and Fox but an economic interest of only 14 per cent.

The abandonment of the monumental deal was announced in a three-line statement from News Corp to the Securities and Exchange Commission saying the company received “a letter from K. Rupert Murdoch withdrawing the proposal to explore a potential combination of the Company and Fox Corporation” because he and Lachlan Murdoch “have determined that a combination is not optimal for shareholders of News Corp and FOX at this time.”

From the get-go shareholders questioned Murdoch’s masterplan to create a $US26 billion ($37 billion) mega media company containing his empire’s print, digital, book publishing and real estate assets alongside Fox’s news and sport broadcast assets.

In the end the shareholders from both Fox and News Corp that spoke publicly about their opinions on the proposed consolidation, there was a unanimity of criticism.

Activist shareholder Irenic Capital publicly opposed the deal and published a letter it sent to the two special board committees within Fox and News arguing against it.

Irenic has a stake in News Corp, but pointed to risks owning Fox, which it argued “is subject to litigation that may result in billions in costs”.

That legal action in which Dominion Voting Systems is suing Fox News and its parent company, Fox Corp, for $US1.6 billion over repeated claims that it rigged its voting machines as part of a conspiracy to steal the 2020 presidential election from Donald Trump. Murdoch’s deposition in the case was heard last week.

Perhaps for Murdoch the motive was to undertake one last corporate tidying up exercise as he gets deeper into his 90s that would pave the way for his eldest son Lachlan to more simply control the empire.

Independent Franchise Partners, a significant investor in Murdoch’s companies, said in late November that it opposed the deal.

Additionally, analysts from several major investment banking houses, including those that were traditionally close to the Murdoch camp, also pointed out the pitfalls of the proposed plan.

All questioned how consolidating the two companies would simplify the group. Many argued that one large company containing a myriad diverse media assets would make it less attractive.

Already Fox and particularly News Corp trade at well below their true value because of their complexity.

Shareholders and analysts had been vocal in their opposition to the plan.Credit:AP

Perhaps for Murdoch, the motive was to undertake one last corporate tidying up exercise as he gets deeper into his 90s that would pave the way for his eldest son Lachlan to more simply control the empire.

The reunification represented a reversal of the deal done ten years ago to split the company in two, which created two separately listed media companies.

Back in 2013, when Murdoch decided to split his multibillion-dollar corporate empire, News Corp was reeling from a phone hacking scandal at its UK tabloids and the print media business globally was deeply challenged.

The empire has evolved significantly since then and investors are more focused on real simplification. There has been a push to break up parts of the empire – on the basis that maximising the value of Murdoch’s empire could require fragmentation rather than amalgamation.

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