Last October, nearly a decade after News Corp. and Fox split, Rupert Murdoch proposed a reunion. The media mogul had divided his holdings in 2013, after a phone-hacking scandal at his British tabloid, News of the World, that had opened the company up to financial and legal risks. Last year, he was exploring the possibility of bringing News Corp (whose assets include the Wall Street Journal, New York Post, Dow Jones, and HarperCollins Publishers) and Fox Corp (the parent company of the Fox broadcast network, Fox News, Fox Sports, and others) back under one roof. Murdoch saw “potential moneymaking and cost-saving opportunities in joining the two companies,” according to the New York Times, like integrating its media properties and getting into the growing sports betting business. The move would have also, Bloomberg wrote, “likely consolidate[d] power in the hands of his son Lachlan Murdoch.”
But on Tuesday, the proposed merger was withdrawn. In a statement, News Corp said that Murdoch and his elder son Lachlan, the chief executive of Fox, had decided combining the two companies “was not optimal for shareholders of News Corp and Fox at this time.” The special committees that both companies had formed to evaluate the deal were dissolved this week.
As veteran business journalist Georg Szalai wrote, there’s been a lot speculation on Wall Street why this deal fell through. Analyst Doug Creutz, with investment bank company Cowen, surmised the deal was squashed “due to opposition from large investors,” like T. Rowe Price (News Corp’s second-largest shareholder). “T. Rowe indicated they believed that a combination would further undervalue News Corp shares,” Creutz wrote. T.Rowe wasn’t the only shareholder who’d raised objections to the prospect: Activist investor Irenic Capital Management sent a letter to News Corp last November, the Times reported, expressing concern that the deal “fails to maximize News Corp’s value.” Another News Corp investor, Will Granger of Airlie Funds Management, questioned the “commercial rationale for the deal” in an interview with the Times. “Does The Wall Street Journal gain by having Fox attached to it? That’s not obvious to me.” There was also pushback from James Murdoch, Murdoch’s younger son, who according to the Times, “wrote letters to the News Corp and Fox boards raising questions about the deal.” James left the News Corp board in 2020, but still has one vote on the Murdoch Family Trust. (Rupert has four votes.)
“Although most analysts believe that Lachlan Murdoch is the chosen successor, this sudden demonstration of stockholder clout is a warning that however much a founding mogul believes that family members will rule forever, times have changed,” veteran journalist Clive Irving wrote in The Daily Beast.
The fact that Fox Corp and Fox News are currently being sued for $1.6 billion by Dominion Voting Systems in a high-profile defamation case may have also played a role. A Wednesday report by Wolfe Research analyst Peter Supino highlighted the “risqué relationship” between Murdoch’s two companies. “Fox Corp. spent years indemnifying News Corp’s legal expenses related to the U.K. hacking scandal,” Supino wrote. “But in true ironic fashion, Fox now finds itself in court defending against defamation allegations from Dominion Voting Systems for election fraud linked to the Trump-Biden run-off. We believe this was a meaningful obstacle to getting the extended family’s approval of a Fox/News Corp relationship.” Writing in the Daily Beast, Irving added, “News Corp shareholders were very sniffy about being in the same corporate bed with Fox News, which they considered toxic, and would similarly suffer a loss in market value.”
However, a person familiar with Rupert and Lachlan’s thinking told Vanity Fair that the decision to reverse the proposed merger was due not to shareholder feedback but to the emergence of a deal to sell Move, News Corp’s online real estate business. Reuters on Tuesday reported that News Corp was in talks to sell Move—the parent company of Realtor.com and other real estate websites—to Costar Group for about $3 billion. News Corp on Wednesday confirmed the talks to sell.