There’s a perfect storm brewing in the $18bn News Corporation.
First, there is the Succession-like battle in which Rupert Murdoch is trying to change the terms of his family trust in order to secure eldest son Lachlan’s role at the head of the two family-controlled US listed companies, News Corp and Fox Corp. Although the 93-year-old patriach has seemingly spurned his other three children, under the terms of the trust, they would all share equal power after his death.
The whole drama goes to court in Reno, Nevada on Monday (Sept 16) where Murdoch Sr will argue that giving total control to Lachlan will benefit the entire family, while siblings James, Elisabeth and Prudence will say the opposite. Their petition to the court might just have something to say about the US$790mn damages paid (so far) to the voting system company defamed by Fox News as part of its support of former President Trump’s 2020 allegations of voter fraud. The sidelined Murdoch “kids” have strong views on the future of their family business.
Second, News Corp seems set to sell its 65% stake in Foxtel, the Australian pay TV network. After years of reportedly trying to divest the struggling service, the news that it had received an “unsolicited bid” can reasonably be interpreted as a near-certain sale, perhaps for a consideration of at least A$1.5bn ($1bn). That could be a good price for the 29-year-old US$1.9bn-revenue Foxtel, which has 4.7mn subscribers, a 12% churn rate and impossibly tight Aussie competition with local and international streaming companies.
Third, News Corp’s 61.4% owned, Australia-listed digital real estate group REA – currently valued at A$26bn ($17bn) – is expected to make a $7bn (£5.5bn) cash and paper bid for the London listed, £400mn-revenue Rightmove, which has 80% market share in the UK. The combined businesses would have revenue of £1.2bn ($1.6bn) and some £720mn ($950mn) of EBITDA.
It seems likely that all three issues will be clarified during September. But that will only be the start of what may become a major upheaval in the composition and control of the News-Fox companies. They will need to address three questions increasingly posed by independent shareholders and perhaps (now) by family members themselves with their eyes on the future:
- Will the enlarged REA Group be listed in the UK or US?
- Will Dow Jones be sold or de-merged?
- Will News Corp be merged with Fox Corp?
Before considering the potential answers to those questions, we should review the financials of News Corp itself. In the year ended June 30, its two best performing sectors – Property (including REA) and Business (Dow Jones including the Wall Street Journal) – accounted for two-thirds of the profit, the best margins and most of the growth. The News subsidiary (including newspapers in US, UK and Australia and radio in the UK) – even assuming the temporary benefit of Google-Meta “royalties” – lost 25% of its EBITDA. Books were a good performer, Foxtel was poor.
| News Corp Yr to June $bn SnapShot | 2024 | 2023 | Rev change | ||||
| Rev | EBITDA | % | Rev | EBITDA | % | ||
| Business Dow Jones | 2.23 | 0.54 | 24% | 2.15 | 0.49 | 23% | +4% |
| Property REA/ Move | 1.66 | 0.51 | 31% | 1.54 | 0.46 | 30% | +8% |
| Foxtel Australia | 1.92 | 0.31 | 16% | 1.94 | 0.35 | 18% | -1% |
| Books Harper Collins | 2.09 | 0.27 | 13% | 1.98 | 0.17 | 9% | +6% |
| News | 2.19 | 0.12 | 6% | 2.27 | 0.16 | 7% | -4% |
| TOTAL | 10.09 | 1.54 | 15% | 9.88 | 1.42 | 14% | +2% |
The REA deal
It seems inevitable that the REA Group (enlarged with acquisition of the UK’s RightMove) would be listed in either the UK or US. It would, therefore, become an independent company (albeit still with a major News Corp shareholding) for the first time since Lachlan Murdoch helped to rescue the fledgling business by investing a mere A$10mn in 2000.
The Australian business, which grew revenues by 19% last year, claims 2.4x the web traffic of its longtime close Australian competitor Domain (60% owned by Nine Entertainment Company). In putting together its plans for REA post-RightMove, News Corp will be working out how best to include its non-REA real estate interests. It currently owns 80% of the US-based Move (trading as Realtor. com) of which REA owns the remaining 20%. Similarly, REA owns 78% of its India subsidiary and News Corp owns the remaining 22%.
Bringing the News Corp/REA digital real estate interests together would create a highly attractive $2.2bn-revenue/ 50% EBITDA margin business with substantial interests in Australia, UK, US, and India. Its value could be hugely enhanced by a London/ New York listing.
That’s why the possible de-merger of the real estate interests could become part of an overall rationalisation, involving – perhaps – what is now News Corp’s largest and most profitable business…
The Dow Jones future
It’s18 years since News Corp acquired Dow Jones (publisher of the Wall Street Journal) from the Bancroft family for $5.3bn (2x revenue). The price per share was ultimately almost double its trading level in the months before Rupert Murdoch’s audacious deal. It was a trademark transaction in which he paid handsomely to capture a highly strategic asset and silence the family squabbling. The New York Times sniffily noted that the acquisition “demonstrated once again Mr Murdoch’s membership in the distinct minority who are enthusiastic about the industry’s future”.
But, for Murdoch, who had been rebuffed in a decade-long bid to acquire the Financial Times, Dow Jones and the 135-year-old Wall Street Journal (WSJ) were always more than a newspaper. To prove the point, News Corp bought ads in newspapers around the world to trumpet the acquisition.
In the WSJ’s third century, the Dow Jones acquisition may be about to prove the wisdom of the deal (and its price) that was not always apparent in the intervening years. The Dow Jones group now includes:
- Wall Street Journal, Barron’s, Investors Business Daily
- Dow Jones Newswires
- DJ Risk & Compliance
- DJ Energy Price Reporting Agencies
During the last three years, Dow Jones has increased its revenue from $2.0bn in 2022 to $2.2bn in 2024 with subscriptions and circulation now accounting for 79% of the total. But the growth of risk & compliance and the energy PRAs (acquired primarily from S&P Global for some $1.4bn) underline the decline of the WSJ as a newspaper but Dow Jones’ growth as a business and financial publisher.
That’s the story because Dow Jones is a B2B business in a mainly B2C media group and could be valued more highly as/when it is divested or de-merged.
The break-up?
The $2.23bn revenue/ $540mn EBITDA, subscriptions-led Dow Jones might be worth at least $10bn (say 18x EBITDA in 2025) – or more than 50% of the current enterprise value of News Corporation. Unsurprising for those longtime investors which have periodically called for a profit maximising re-focusing of the portfolio, the combination of just the Property and Business sectors (39% of News Corp revenue and 67% of profit in 2024) could attract a total valuation of more than 100% of the listed company. Most of the property assets are, of course, listed as REA Group but Dow Jones could, conceivably, also be listed at a time when data subscriptions companies are highly-rated across the world. Given that Harper Collins is the world’s second largest book publisher and that Simon & Schuster was sold for 1.5x revenue, we might assume that the News Corp subsidiary could be valued at $3-4bn.
Taking those valuations, it seems clear that (even without attaching any value at all to the newspapers and radio) the breakup value of the rest of News Corp could be as much as 70% higher than the $18bn enterprise value:
| News Corp $bn | 2024 revenue | Valuation? |
| Property | 1.7 | 10-12 |
| Business | 2.2 | 10-12 |
| Books | 2.1 | 3-4 |
| Foxtel | 1.9 | 1-2 |
| News | 2.2 | ? |
| TOTAL | 10.1 | $24-30bn |
That assessment of the ‘true value’ of the Murdoch-controlled companies has real meaning in view of the family dispute but also the future of the companies after Rupert Murdoch. It’s one thing to tolerate something other than current profit maximisation from the man who created the Fox Network, the pan-European Sky TV, and what has been one of the world’s most successful newspaper companies. Starting 72 years ago from a single inherited newspaper in Adelaide, he defined global media strategy through news, movies, TV, books and satellites and – lest we forget – secured op-of-the-market $71bn sales of 21st Century Fox to Disney and the $40bn Sky to Comcast. His son Lachlan (currently chair of News Corp and executive chair and CEO of Fox Corp) could hardly expect the same kind of latitude from investors who may be inclined to remind him that his family is but a minority (c14%) shareholder in each of the listed companies. Some activists will be challenging the two-tier share structure under which the Murdoch family controls some 41% of the voting shares. News Corp shareholder Starboard Value LP has issued a non-binding proposal for a vote at the 2024 AGM.
The end game
Ultimately, the potential breakup values of News Corp will enable it to buy the support of investors (including the Murdoch family) for options which might include the merger of a re-focused News Corp with the $14bn-revenue Fox Corp. Divesting or de-merging some assets might even be part of a settlement within the family itself. Might Lachlan Murdoch be managing one business and his estranged siblings another? If, as the New York Times has said, Rupert Murdoch feels that only his eldest son would maintain the distinctive political posture of many of the News and Fox media brands, any family carve-up may centre on Fox News, the most polarising (and most profitable) brand of all. The $6bn-revenue cable network is still paying the price for the US voting allegations and also the UK phone hacking offences.
The problematic issues, inevitably, include the newspaper-centric activities on which the whole empire was built from scratch by Rupert Murdoch. It is assumed the founder would not contemplate divesting these inevitably declining businesses, although there have been whispers of putting the strongest legacy brands (The Times of London and The Australian) into non-profit foundations to secure their future and his legacy. The reality is that, after Rupert Murdoch, no one company is likely to want to own all these newspapers and radio in the UK, Australia and the US; each could attract separate buyers.
Whatever happens in Reno (and, later in the month, for Foxtel and REA), the Murdoch family’s media ownership may never be the same again. We already knew that, of course. But it’s started early.
