Rupert Murdoch withdraws proposal to merge Fox Corp and News Corp

Rupert Murdoch has called off his effort to merge the two parts of his media empire, saying it was “not optimal” for shareholders companies at this time.

Fox Corp owns Fox News and the Fox broadcast network, along with local TV stations and the Tubi streaming service. Picture: Eduardo Munoz/ Reuters.

Rupert Murdoch called off his effort to merge the two parts of his media empire, News Corp and Fox Corp, saying the transaction “is not optimal” for shareholders of the companies at this time.

Mr Murdoch proposed reuniting News Corp and Fox last October, nearly a decade after they split apart. In statements on Tuesday night, the boards of the two companies said they received a letter from Mr Murdoch withdrawing the proposal.

Fox Corp owns Fox News and the Fox broadcast network, along with local TV stations and the Tubi streaming service. News Corp is the parent company News Corp Australia, publisher of The Australian, and of Dow Jones, publisher of The Wall Street Journal, as well as other assets including HarperCollins Publishers and news organisations in the UK.

People familiar with Mr Murdoch’s thinking said that the companies could benefit from being bigger and that the combined entity would have had more balance-sheet strength to pursue acquisitions. The companies also could have joined forces in areas such as sports betting, the people said.

Some large investors were sceptical of the proposed transaction. In November, the Journal reported that Independent Franchise Partners, a London-based investment firm and one of the largest non-Murdoch holders of both News Corp and Fox, opposed the recombination, arguing it wouldn’t realise the full value of News Corp.

T. Rowe Price Group, a large News Corp shareholder, raised concerns with the company and its board about how such a deal would value News Corp, according to people familiar with the matter.

In a letter to News Corp’s board, shareholder Irenic Capital wrote that “a combination with Fox does not serve News Corp’s strategic goals.” The letter also noted that “Fox is subject to litigation that may result in billions in costs.”

Special committees of the Fox Corp and News Corp boards that had been set up to review the proposed merger have been dissolved, the companies said.

News Corp has also explored selling or spinning off its real estate assets, people familiar with the situation said. The company is open to potentially hiving off those assets, although tax considerations may make that challenging, they said. News Corp’s digital real-estate services group includes its 61.4 per cent stake in the ASX-listed REA Group, and its 80 per cent interest in Move, an online real-estate business based in Santa Clara, California that operates the website Realtor.com. The remaining 20 per cent interest in Move is held by the REA Group.

Mr Murdoch is executive chairman of News Corp and chairman of Fox Corp. His son Lachlan Murdoch is co-chairman of News Corp and executive chairman and chief executive of Fox. The Murdoch family trust has a roughly 39 per cent voting stake in News Corp and about a 42 per cent voting stake in Fox Corp, according to securities filings from the companies.

Jessica Toonkel and Corrie Driebusch contributed to this article.

The Wall Street Journal