News Corp shares surge 8pc on news of board approving $1.4bn buyback

ASX-listed shares in News Corp have soared after the media major’s board approved a $US1bn ($1.4bn) stock buyback on Wednesday.

News Corp chief executive Robert Thomson. Picture: AFP

ASX-listed shares in News Corp have soared after the media major’s board approved a $US1bn ($1.4bn) stock buyback on Wednesday.

The share price closed at $32.56 on Thursday, up 8.4 per cent, making News Corp, publisher of The Australian, the day’s best performer on the ASX.

The buyback program, which the company said had no time limit, represented about 7.8 per cent of News Corp’s market capitalisation of $US12.8bn before it was announced.

The program will include the purchase of a combination of class A common shares and class B common shares.

It replaces a previous program to buy back $US500m worth of shares of class A stock that the board had approved in 2013.

“These landmark decisions follow our most profitable year since the launch of the new News Corp in 2013 and are a tangible sign of our confidence in the inherent value and enormous potential of our businesses,” News Corp chief executive Robert Thomson said.

“With the board’s active support, we are acutely focused on long-term value for investors, balancing strategic investments and capital returns. Our robust cash balance and strong free cashflow have enabled us to launch a much larger, more aggressive buyback program that we intend to begin after our quiet period ends.”

At the same time, the approval for a new buyback program follows a new stockholders agreement between News Corp and the family trust of Rupert Murdoch, News Corp’s executive chairman.

Under the agreement, News Corp and the family trust must avoid actions that would give the trust and Murdoch family members more than 44 per cent of the voting power of the company’s class B stock, News Corp said.

The trust’s voting power also must not increase by more than 1.75 per cent in any rolling 12-month period, according to the agreement.

A committee of News Corp’s independent board members approved the inclusion of class B stock in the new repurchase program, a company spokesman said.

News Corp is the owner of The Australian and metropolitan mastheads the Herald Sun, Daily Telegraph, Courier-Mail and Adelaide’s The Advertiser. Its holdings also include Dow Jones Newswires and The Wall Street Journal, as well as stakes in real estate play REA Group.

Last month, in announcing News Corp’s end-of-financial-year results, Mr Thomson observed the strong performance of its Australian mastheads.

“We saw a 25 per cent increase in digital subscribers at the mastheads in the fourth quarter, while there was a healthy recovery in advertising,” he said. “Clearly businesses are subject to the vagaries of the virus in Australia, but the ­robust recovery in recent months is a hopeful harbinger.”