The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Jennifer Saba
NEW YORK, Sept 9 (Reuters Breakingviews) - It’s hard to push Rupert Murdoch around. The latest to try is hedge fund Starboard Value, which wants to eliminate News Corp NWSA.O super-voting stock that gives the media mogul de facto control with a comparatively small portion of the equity. Even at 93 years old, he is likely to stand his ground.
Starboard Chief Executive Jeff Smith submitted a -binding resolution on Monday to put the dual-class share structure to a vote. Murdoch and his family hold 40% of the voting Class B shares but an economic stake of only about 14% in the owner of the Wall Street Journal.
In 2015, -Murdoch News Corp shareholders backed a measure that would have implemented a one-share-one-vote system, but the board ignored the outcome. New developments make the matter relevant again. Murdoch is preparing to alter the family trust this week to give his eldest son, Lachlan, who chairs News Corp and runs sister company Fox FOXA.O, unchallenged authority over his siblings, according to the New York Times. Upon Murdoch’s death, there are four designated trustees, including his younger son, James.
What hasn’t changed much is how the family dynamics hurt News Corp’s valuation. It has a 61% stake in Australian property website REA Group, currently worth $11 billion. Dow Jones, which houses the Wall Street Journal and is expected to generate $600 million of EBITDA year, according to estimates gathered by LSEG, would be worth another $11 billion on the same 18 times multiple at which the New York Times trades. Combined, it suggests a 40% discount before even factoring in the company’s pay-TV holdings, British or HarperCollins book publisher.
There’s a case to be made that Murdoch, who has created a fair amount of value for himself and other shareholders over the decades, might warrant being allowed to keep a firmer grip on the empire he built. It’s almost impossible, however, to justify bequeathing such power to his children. Other clans have relented, including the Sands family at Modelo brewer Constellation Brands STZ.N in 2022.
Convincing Murdoch to do something similar will be challenging. Aggressive investors have unsuccessfully tried to influence his thinking before, for example by urging News Corp to spin off the online real estate operations a couple years ago. Instead, REA is contemplating expansion by acquiring UK housing portal Rightmove. Such defiance suggests that the company’s bad-governance discount will be as elusive as ever.
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CONTEXT NEWS
Hedge fund Starboard Value said on Sept. 9 that it had submitted a -binding shareholder resolution to eliminate the dual-class share structure at Rupert Murdoch’s News Corp, confirming a Sept. 6 report by Reuters that cited unnamed sources.
Murdoch, 93, effectively controls the company alongside his family trust, which holds 40% of the voting with an equity stake of about 14%.
In a letter to fellow News Corp shareholders, Starboard Chief Executive Jeffrey Smith said the company is “burdened” by its share structure and that there is reasonable argument for Murdoch to extend the super-voting rights to his heirs.
(Editing by Jeffrey Goldfarb and Sharon Lam)
((For previous columns by the author, Reuters customers can click on SABA/
jennifer.saba@thomsonreuters.com))