‘Not optimal for shareholders’: Murdoch scraps proposed Fox-News Corp merger as he prepares to sell real-estate assets

Rupert Murdoch has abruptly halted plans for a potential merger of his two major media companies Fox Corporation and News Corporation after conceding the proposed tie-up was not in the best interest of shareholders.

News Corp chief executive Robert Thomson wrote to staff on Wednesday to inform them of the decision by Murdoch and his son Lachlan Murdoch to stop an assessment of a potential merger by an independent committee that was formed three months ago. The withdrawal of the plans, which were fiercely opposed by some major shareholders, coincides with advanced talks between News Corp and rival CoStar about the sale of its stake in real-estate listings site Move, the owner of realtor.com.

Rupert Murdoch and son Lachlan have decided that a merger is “not in the best interests of shareholders”.Credit: AP

People familiar with those talks, who requested anonymity to speak freely, said the potential deal will be worth more than US$3 billion ($4.3 billion) and was enough to have changed the prospect of a tie-up between Fox and News Corp. The Financial Times reports News Corp would sell the entirety of its 80 per cent stake under the plans. News Corp confirmed the plans in a statement to the ASX and NASDAQ.

News Corp owns about 80 per cent of Move, while the remaining 20 per cent is held by REA Group. When the deal was signed in 2014 for US$950 million, Thomson said News Corp would market the real-estate platform through its mastheads The New York Post and The Wall Street Journal. It is not clear whether this would continue under a new deal.

“Any potential transaction would support News Corp’s strategy to optimise the value of its digital real estate services segment, while strengthening Realtor.com’s competitive position in the market,” the company said in a statement.

The sale, if it goes ahead, is not expected to directly impact News Corp’s local real-estate listings company, REA Group, but it does raise questions of whether News Corp has similar plans to reduce its 61.6 per cent stake locally. REA Group released a statement to the ASX confirming talks, but said there is no guarantee a transaction will be completed.

News Corp announced it had set up a special board committee of independent directors in October. The group is assessing the viability of a deal that would combine Fox Corporation, which runs the cable TV network and wagering company FoxBet, with the traditional publishing and real-estate assets including The Wall Street Journal, The Times and The Australian.

But the potential transaction was fiercely opposed by major shareholders including US investment giant T Rowe Price and Independent Franchise Partners, who thought that the merged company would be worth less on the stock market than the individual groups.

The independent committee had not yet decided on whether the merger was viable, but on Wednesday News Corp and Fox Corp both released statements about Murdoch’s decision to withdraw the plans.

“The News Corp Board, following the receipt of a letter by Rupert Murdoch, has dissolved the committee of independent directors,” Thomson said in a note to staff. “The letter indicated that Rupert and Lachlan Murdoch have determined that a combination of the two companies is not optimal for shareholders of News Corp and FOX at this time.”

News Corp and Fox Corp have been separate entities since 2013, and both have changed dramatically since the split. Fox sold most of its entertainment assets to Walt Disney Co in a $US71 billion ($114.5 billion) deal, and is largely focused on broadcasting and cable television, led by the Fox News Channel. News Corp has diversified into new areas, such as online real estate services.

Uniting the two businesses would have given the Murdochs a broader portfolio of opportunities in which to invest. It would have also consolidated power in the hands of Rupert’s eldest son Lachlan, who is News Corp’s co-chairman. He is also executive chairman and chief executive officer of Fox.

Adam Katz, co-founder and chief investment officer of Irenic, who fiercely opposed the merger, said it was the “right decision”. “Irenic is encouraged that Executive Chairman Rupert Murdoch and Co-Chairman Lachlan Murdoch have concluded that a combination with Fox is not in the best interests of News Corp and its shareholders. Looking ahead, News Corp has an opportunity to create substantial value for its owners.”

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