An activist investor stepped up pressure on News Corp on Sunday asking it to reconsider a proposal from Rupert Murdoch to merge the two parts of his media company, News Corp and Fox.
The investor, Irenic Capital Management, said in a letter to News Corp, which was reviewed by The New York Times, that it could vote to oppose the merger, arguing that the proposed deal is likely to undervalue News Corp.
“We want to be clear: Walking away from a potential transaction is better than agreeing to a deal that doesn’t maximize News Corp’s value,” Irenic said in the letter, which was addressed to the special committee of independent board members that reviewed the merger proposal. .
Irenic owns approximately 2 percent of News Corp.’s class B stock, according to the letter. These shares give more voting rights than the more numerous class A shares.
Along with the letter, Irenic sent an email requesting to meet with the Special Committee to share her views and those of other shareholders.
It is the second time that Irenic asks for a meeting. Last month, Irenic did this when it urged News Corp to investigate whether it could split its online real estate listings from its other companies, including The Wall Street Journal, HarperCollins and The New York Post. It said in its letter on Sunday that it also wants News Corp to consider spinning off its Dow Jones media properties. The company claims that News Corp. shares, now trading at $18 per share, could be worth $34 per share. It is advised by executives including Jon Miller, a former chief digital officer of News Corp.
The letter is intended to put pressure on the special committees that both Fox and News Corp. have appointed to evaluate Mr. Murdoch’s proposal. He has a lot to say on the matter: The Murdoch Family Trust, which Rupert Murdoch controls along with his oldest children, has about 40 percent of the vote at both Fox and News Corp through its more powerful Class B stock. But any deal requires the approval of a majority of investors who are not part of the Murdoch trust.
Irenic isn’t the only News Corp investor asking questions. Will Granger of Airlie Funds Management said in an interview that he was not convinced that the two companies would be better together.
“We don’t see many commercial reasons for the deal,” Granger said. Does The Wall Street Journal benefit from being attached to Fox? That is not obvious to me.”
Airlie has a small stake in News Corp’s total stock, Granger said. His argument was similar to Irenic’s, saying that Airlie would not support a merger unless Fox paid a significant premium over News Corp’s share price or made another deal at the same time, such as the sale of News Corp’s real estate business.
News Corp’s largest minority shareholders, T. Rowe Price and Vanguard Group, which together own about 20 percent of the company’s Class A shares, did not respond to a request for comment.
News Corp declined to comment.
The deal between News Corp and Fox, if it goes through, could bring a collection of news and entertainment assets, including Fox News, The Wall Street Journal, the Fox broadcast network and TMZ, under the same company umbrella. Mr. Murdoch has said he sees opportunities to cut costs and make money by joining the two companies, including ways to use the company’s assets for emerging business activities within the two companies, such as sports betting.
Since the two companies parted ways in 2007, the industry has gone through a wave of consolidation to compete with streaming giants like Netflix and counter the decline of the traditional TV business.
“Scale is important,” Lachlan Murdoch, the CEO of Fox and Rupert Murdoch’s eldest son, said in November. “Scale offers flexibility in many ways.”
The proposal would divide ownership among shareholders based on each company’s market value, although it did not suggest a proposed valuation for the companies.
The move came as a surprise to some in the media industry, as Rupert Murdoch had once claimed his wealth was better off in separate companies.
In a note to investors last month, the analyst firm MoffettNathanson said it expected Fox to sell one day, “but not like this!” The note stated that MoffettNathanson was concerned that the asset collection could confuse investors, which would erode the value they place on a combined company.
Shares of News Corp are down about 20 percent over the past year, giving it a market valuation of $10 billion. Shares of Fox are also down about 20 percent, giving it a market value of $16 billion.
Benjamin Mullin reporting contributed.
