The family rift driving Rupert Murdoch to redo his ‘irrevocable’ trust
A years-long succession drama is heading for its series finale in a US court. The four oldest children are facing off over control of a media empire.
The Murdoch family had cause to celebrate in the spring of 2019. Patriarch Rupert Murdoch’s sale of Fox Entertainment assets to Disney had netted some $US12bn to be split up among his children.
The media titan had an unusual request: He wanted each of his four oldest children to give him upward of $US100m from their payouts. Three of them — Lachlan, Elisabeth and Prudence — agreed to do so, people familiar with the situation said, in a sign of respect for the fortune he had earned over the years.
Murdoch’s younger son, James, who was increasingly at odds with his father, refused to go along, those people said.
It was a peculiar twist in a family drama centred mostly on how to transfer wealth and power from the patriarch to his heirs — not the other way around.
Now, after years of internal battles over business strategy, politics and succession plans, the family is gearing up for a climactic legal clash over control of the empire.
Rupert Murdoch, 93 years old, is seeking to amend his trust — which holds big stakes in Fox News owner Fox Corp. and Wall Street Journal parent News Corp — to ensure that when he dies Lachlan will control the family holdings spanning cable news, sports media, streaming, newspapers, book publishing and real estate. James Murdoch is resisting the change, and these days he has Elisabeth and Prudence on his side.
A trial to settle the dispute is set to begin Monday in a probate court in Nevada, where the trust is based. It will be closed to the public unless pending legal challenges to open up the proceedings are successful.
The Murdoch trust exercises considerable influence over Fox and News Corp, publisher of The Australian, with roughly 40% voting stakes in each company. Rupert now controls it, but when he dies, each of his four oldest children will have an equal voting share, people familiar with the matter said.
For Rupert Murdoch, putting more power in Lachlan’s hands is meant to ensure stability at the businesses and avoid a confusing ownership structure in coming years, associates of the mogul said. If he prevails, Lachlan would have the same sweeping authority his father has enjoyed for years, and other shareholders would largely have to accept whatever his plans are for the companies.
If Murdoch loses his bid, the structure could lead to stalemates among the siblings over major decisions. The Murdoch siblings “are reported to have widely differing worldviews, which, collectively, could be paralysing to the strategic direction of the company,” activist investor Starboard said this week in a letter to shareholders, making the case to abolish the dual-class share structure that gives the Murdochs control of News Corp.
In recent weeks, there have been efforts to settle the matter out of court, with James Murdoch signalling to his father’s camp that he and his sisters could sell their stakes in the trust, people close to the situation said. Those buyout discussions didn’t gain traction. Lachlan had explored buying out his siblings previously, including in 2020.
A buyout would be expensive. The Murdoch family’s combined economic interest in Fox and News Corp is worth about $US6bn. One option that has been explored is borrowing money against the trust to finance a buyout of Lachlan’s siblings, people familiar with the matter said. It is possible additional capital would be needed.
Rupert Murdoch announced in September 2023 that he was stepping down as chair of Fox and News Corp. That strengthened the leadership position of Lachlan, Fox’s executive chair, who became News Corp’s sole chair. Though he didn’t say so at the time, the elder Murdoch had been working to shore up Lachlan’s position in the trust, where the real power over the companies lies. He filed papers in the Nevada court in October, court documents reviewed by the Journal show.
Under the proposed changes, Lachlan would eventually gain control when Rupert’s votes go away. James, Elisabeth and Prudence would still remain financial beneficiaries, alongside two younger siblings from Rupert Murdoch’s marriage to Wendi Deng, Grace and Chloe.
Rupert was moved to act, in part, because he worried James and his sisters would align to block Lachlan’s management of the companies, people close to the Murdochs said. He told people he was concerned that James, who has been critical of Fox News — especially since the aftermath of the 2020 election — would moderate the channel’s content, undermining its appeal to conservative audiences. Others close to the Murdochs said they feared James would push to sell Fox News.
It’s not uncommon for people to amend their trusts, such as to change the age at which someone inherits money or the line-up of trustees. But it’s rare to go to court, and the stakes of the Murdoch battle are especially high, said Michael Arlein, a trust and estates lawyer who has worked extensively with wealthy families.
“Your garden variety trust doesn’t dictate control of a multibillion-dollar company,” he said, noting that there are hints in the case of the TV show Succession, which was inspired partly by Murdoch family storylines. “This is a very consequential amendment in a very consequential trust.”
BROTHERS RISING
The trust was formed at the time of the 1999 divorce of Rupert from his second wife, Anna Murdoch Mann, the mother of James, Lachlan and Elisabeth. She wanted to ensure her children had a future ownership stake in the Murdoch empire. The trust was “irrevocable,” meaning it would be difficult to alter.
Rupert Murdoch brought several of his children into the business, with each of his sons taking turns as heir apparent. Lachlan, Murdoch’s oldest son and the one most aligned with his conservative politics, began his career at News Corp in 1994 and eventually rose to deputy chief operating officer. He surprised many by quitting his post in 2005, after conflicts largely over the company’s television station group led him to suspect his father was undercutting his work. Lachlan moved back to Australia with his family, retaining his board seat.
As Lachlan launched a series of media ventures in Australia, his younger brother, James, started to climb. James had arrived at News Corp after dropping out of Harvard and starting a hip-hop label, which he sold to the company. He rose to hold top positions in Asia and Europe, including a stint overseeing News Corp’s U.K. publishing unit when an embarrassing phone-hacking scandal rocked the company.
In 2015, after returning to the fold, Lachlan was named executive co-chairman of 21st Century Fox (now Fox Corp.) alongside his father, and James was appointed chief executive officer, succeeding his father. The brothers seemed to be on equal footing, but inside the companies the understanding was that Lachlan was the first among equals.
Executives at Fox saw tensions between the brothers. The position of head of ad sales was open for about six months in 2017 amid a stalemate between the two over who should fill the role, said people familiar with the situation. James’s choice was ad tech veteran Joe Marchese, whose company Fox had purchased for about $200m a few years earlier. Lachlan was against hiring Marchese, but ultimately relented.
In 2015, James pitched the idea of News Corp and Fox moving from Midtown Manhattan to a new space downtown and even invited the architect Bjarke Ingels to present to executives about how he would design the space. Rupert and Lachlan overruled him, deciding to stay in Midtown.
DISNEY DRAMA
James’s relations with his father were further strained when Rupert sold much of Fox’s entertainment business to Disney. James told people close to him that he was hoping for a senior role at the combined company, according to people familiar with discussions at the time. Murdoch and Disney CEO Bob Iger made it clear James wouldn’t have such a role.
James’s tenure as chief executive of Fox ended in 2019 after the Disney deal closed, and the following year he resigned from the News Corp board, completing his departure from the family’s businesses. In his resignation letter, he attributed his departure to “disagreements over certain editorial content published by the company’s news outlets and certain other strategic decisions.”
He and his wife, Kathryn, are ardent environmentalists who have designed their philanthropy and investing around fighting climate change and reshaping the democratic process to stop encouraging hyperpartisanship. They told close associates they were disturbed by what they saw as an extreme right turn Fox News took in the age of Donald Trump, according to people familiar with the matter, and want to see it occupy centre-right territory in the media landscape.
Rupert told associates he was dismayed that James and his wife seemed to be embarrassed by Fox yet were happy to enjoy the fruits of its financial success. Rupert’s estrangement from James grew. The two aren’t on speaking terms, people close to the family said.
In 2021 James declined to attend his father’s 90th birthday party at New York’s Tavern on the Green restaurant in Central Park. Guests watched a film about Rupert’s life that featured Elisabeth and Lachlan. James didn’t participate, said people familiar with the event.
In late 2022, Rupert Murdoch pushed to reunite Fox and News Corp, which had been split into two companies years earlier, arguing that a merger would create the scale needed to compete in modern media. People close to the companies saw another potential rationale: It would strengthen Lachlan’s position as successor.
James wrote letters to the boards of both companies opposing it, citing a lack of business logic and the risk of contaminating brands like the Journal by putting them under the same roof as Fox News, which was being accused of knowingly airing false claims that the 2020 election was stolen, people familiar with the letter said. Fox Corp. ultimately settled the defamation suit brought by Dominion Voting Systems for $787.5m.
Word began to spread inside Rupert Murdoch’s businesses that James could align with his sisters in an effort to take control of the empire. Tucker Carlson, then a Fox News star anchor, was concerned James would reshape the channel into something more centrist, and made a pitch in early 2023 to Fox’s top brass for a long-term contract extension to ensure his own job security, according to people familiar with the matter. The extension didn’t come. Carlson and Fox parted ways a few months later.
James’s actions were a preview for Rupert Murdoch of what might happen after his death: family shareholders sparring over strategy.
Whoever controls the Murdoch empire in the coming years will likely face some major strategic decisions. Robert Fishman, a senior analyst at research firm MoffettNathanson, said the Fox side of the business could attract takeover interest, especially if Fox News were folded into News Corp, leaving Fox more focused on sports. “The fact they have sports rights locked up could make them attractive,” he said.
DINNER WITH DE NIRO
Elisabeth took a different professional path than her brothers. After holding various positions at News Corp, she struck out on her own to launch a TV production company, Shine Group, known for reality shows such as “MasterChef,” eventually selling it to the family company in 2011. She now runs another entertainment company, Sister.
She wasn’t always aligned with James, particularly during the phone-hacking scandal, when she advocated privately for him to step back from his executive role at News Corp. But they grew closer in recent years.
In 2019, Elisabeth participated in an investment round led by James’s company, Lupa Systems, in Tribeca Enterprises, the company co-founded by Robert De Niro that puts on the annual Tribeca Film Festival. The following year, Sister invested in Artists, Writers & Artisans, a comic-book publisher that James had backed the year before.
The attempt to merge Fox and News Corp also brought James closer to Elisabeth and Prudence, since the sisters also had concerns about the deal, according to people familiar with the situation. The three siblings began speaking more regularly.
Elisabeth has great affection for her father. Their relationship was tense while she was married to prominent public-relations executive Matthew Freud — a public critic of Fox News who has said he was “ashamed and sickened” at what he saw as its disregard of journalistic standards — but the two grew closer after she and Freud divorced in 2014, people close to the family said.
Still, Elisabeth has privately expressed discomfort about being associated with Fox News, people close to her said. At a 2022 dinner at James’s house for her husband, the artist Keith Tyson, De Niro confronted her on why she hadn’t spoken out against what he sees as Fox News’s corrosive impact on political discourse.
“You can still love your father, but you can tell him he is wrong for what he is doing to this country,” De Niro recalled telling Elisabeth at the dinner. She was visibly shaken after the conversation, and the actor later apologised.
“I called Elisabeth and told her I was sorry,” De Niro told the Journal in an email. “I saw how upset she was and felt badly about that.”
When people have asked Elisabeth how she views her dad’s role in global affairs, according to people close to her, she would say: “I just see my dad.”
Rupert Murdoch has valued Elisabeth’s input, and explored adding her as a board observer, people familiar with the matter said. In early 2023, weeks after the Fox-News Corp merger attempt collapsed, Elisabeth joined her father at the Super Bowl.
The views of Prudence, who worked only briefly for the family business early in her professional life, are less clear. She lives in London and is married to Alasdair MacLeod, a former News Corp executive who now heads an investment company, Macdoch Group.
Changing an irrevocable trust isn’t easy, but Rupert Murdoch is making the claim that putting power in Lachlan’s hands is in the best interests of all stakeholders.
James, Elisabeth and Prudence were sent the proposed trust changes in December, and shortly after objected, disputing “the validity and enforceability of the provisionally enacted trust amendment,” according to the court records reviewed by the Journal.
When a non-profit focused on transparency in Nevada’s courts filed a motion to open the case, a representative for the Murdoch trust objected, arguing in a filing reviewed by the Journal that family trusts like theirs “typically manage significant family wealth, whose principals and family members are at an increased risk if private and sensitive information were to be made public.” A coalition of media outlets has petitioned to open up the court proceedings and unseal filings.
The Murdoch trust representative noted that the probate commissioner, in granting the request to seal the proceedings, said press “coverage of the hearing ‘could expose these persons’ whereabouts, travel plans, and other information that could be exploited by malicious actors.’”
— Jeffrey A. Trachtenberg, Suzanne Vranica and Lauren Thomas contributed to this article.
The Wall Street Journal
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