Murdoch under pressure from US hedge fund to break up his media empire

Rupert Murdoch is under pressure from an activist investor to break up the media empire behind The Australian and London’s Times.

Starboard Value, which is run by US hedge fund manager Jeff Smith, revealed it has built a stake in Murdoch’s News Corp and said it is in discussions with the company.

In a presentation at an investor summit in New York on Tuesday, Starboard said News Corp was “significantly undervalued” and called for a spin-off of its Australian real estate division.

The activist investor’s push comes a month after Rupert Murdoch announced he was standing down as chairman of both News Corp and Fox, handing over the reins to son Lachlan.Credit: Photo by Rob Latour/Shutterstock

The activist said the online real estate advertising business REA Group had been an “incredible investment” for News Corp but said a sale of its 61 per cent stake would unlock more than $US7 billion ($11 billion) in value for shareholders.

It added that such a move would also highlight the value of other parts of the Murdoch empire, which includes Wall Street Journal owner Dow Jones and book publisher HarperCollins as well as the newspaper titles.

Starboard said Dow Jones alone would be worth more than $US7 billion if it were valued at the same multiple as The New York Times.

It said: “We believe News Corp’s collection of assets is worth over $US33 per share. Even when using conservative assumptions, News Corp has an opportunity to create significant shareholder value through a separation of certain assets.”

Shares in News Corp rose 2 per cent to just over $US22 in US trading, giving the company a market capitalisation of roughly $US12.8 billion. Starboard did not disclose the size of its holding.

The activist assault comes a month after Murdoch announced he was standing down as chairman of both News Corp and Fox, handing over the reins to son Lachlan. The media mogul has taken up the role of chairman emeritus of both companies.

The Murdoch family trust still controls around 40 per cent of News Corp voting shares, making it hard for any activist to push through change.

The Murdochs have previously clashed with investors over News Corp’s value. In January, the family called off a troubled effort to merge News Corp and Fox following a backlash from shareholders, who said the enlarged group would be undervalued.

Rupert and Lachlan Murdoch acknowledged that the deal, which would have reunited the media empire a decade after it was split, was “not optimal for shareholders”.

In a further blow the following month, News Corp also abandoned a deal to sell real estate business Move Inc to CoStar Group in a reported $US3 billion deal.

Smith, dubbed by Fortune magazine the “most feared man in corporate America”, is known for activist campaigns at software companies including Salesforce and GoDaddy. In June, Starboard took a stake in Cambridge-based biotech firm Abcam.

A spokesman for News Corp said the company had “always maintained an active and engaged dialogue with our investors and are committed to driving shareholder value”.

He added: “We remain focused on executing our strategic plan, which has helped us set records in profitability over the past three years. We are proud of our rapid digital transformation and bright prospects for long-term growth and value creation.”

Telegraph, UK

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