Rupert Murdoch drops proposal to merge Fox, News Corp, considers sale of Move

Jan 24 (Reuters) – Rupert Murdoch on Tuesday withdrew his proposal to bring together News Corp (NWSA.O) and Fox Corp as the company also plans to sell Move Inc, which operates the Realtor.com website, to the CoStar Group, according to to a regulatory filing and to sources familiar with the process.

Three sources familiar with the matter said News Corp was in talks to sell its stake in Move to CoStar for about $3 billion.

Several prominent shareholders have publicly stated they oppose the proposed Fox-News Corp combination, and on Tuesday, News Corp said in a statement that it was “not optimal for News Corp and Fox shareholders at the current time”.

The deal would have recombined the media empire that Murdoch split apart nearly a decade ago.

News Corp confirmed talks to sell Move to CoStar after Reuters reported it on Tuesday, adding that there is no guarantee the talks will result in a deal.

A CoStar spokesperson said the company “continually evaluates M&A opportunities across a broad range of businesses to maximize shareholder value” and does not comment on “rumors or market speculation.” .

No offers were exchanged between News Corp and Fox Corp before merger deliberations were abandoned, according to sources familiar with the process, who said the refusal of News Corp shareholders played a role in the abandonment of these plans.

A rally in News Corp shares in recent weeks meant Fox would have had to pay a large premium to have the merger go through, something the Murdochs didn’t think they could justify to shareholders, people familiar with the matter said.

MARKET VALUE

While Fox shares are down 5%, News Corp shares are up 25% since talks between the two companies were first announced on Oct. 1. 14. News Corp currently has a market capitalization of around $11 billion, while Fox is valued at just over $17 billion.

Tennis – US Open – Mens Final – New York, U.S. – September 10, 2017 – Fox News Channel President Rupert Murdoch stands as Spain’s Rafael Nadal plays against South Africa’s Kevin Anderson. REUTERS/Mike Segar/File Photo

Murdoch offered to reunite his media empire last fall, arguing that together the publishing and entertainment companies he spun off in 2013 would give the combined company greater scale in news, live sports and information, sources said.

Several people close to the Murdochs saw the attempt to merge the media companies as motivated by succession planning for Murdoch, 91, to consolidate power behind his son and Fox chief Lachlan Murdoch, a notion that the company called it “absurd” in November.

Some of News Corp’s top shareholders, including Independent Franchise Partners and T. Rowe Price (TROW.O), balked at the idea.

Rupert Murdoch and his family trust control about 40% of News Corp and Fox. If a deal had been reached, they would have withheld from voting their shares when each company sought shareholder approval for the merger, due to the potential conflict of interest. This made securing the support of other significant shareholders a precondition to completing the deal.

‘GOOD CHOICE’

Activist investment firm Irenic Capital, which was among the first to say the proposed meeting would likely undervalue News Corp, on Tuesday applauded the decision not to go ahead.

“It’s the right decision,” said Irenic’s chief investment officer, Adam Katz. “Looking forward, News Corp has the opportunity to create substantial value for its owners.”

News Corp agreed to buy Move in 2014 for $950 million to diversify its digital real estate business which, at the time, was mostly in Australia.

Since then, investors in News Corp had asked the company to divest its digital real estate assets. Irenic also publicly urged News Corp to sell its Dow Jones media properties.

During a slide presentation in November, Irenic estimated News Corp’s 80% stake in Move was worth $1.4 billion at $2.47 per share.

In a letter to News Corp employees on Tuesday, News Corp chief executive Robert Thomson said, “In my October memo, I said the special committee’s assessment would have no impact on our operations. this was indeed the case, and remains following today’s announcement.”

Reporting by Dawn Chmielewski in Los Angeles, Svea Herbst-Bayliss, Greg Roumeliotis, Anirban Sen and Helen Coster in New York; additional reporting by Deborah Sophia in Bengaluru; Editing by Bill Berkrot and Grant McCool

Our standards: The Thomson Reuters Trust Principles.

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