Starboard Value owns a stake in News Corp. It is pushing billionaire Rupert Murdoch, the owner of that company, to split it up. Legacy media groups are under increasing pressure to improve their performance from shareholders.
Jeff Smith, the activist hedge fund that runs his hedge fund, announced this position on Tuesday at a press conference. He argued that News Corp.’s stock valuation “doesn’t make sense”, and called for a spinoff of their online property listings division.
If News Corp seperates the digital real estate through a tax free spin[off], . . Smith stated that shareholders would see a significant increase in the share price of the company. Starboard estimates a spinoff of News Corp’s real estate business could unlock value worth more than $7bn for shareholders.
News Corp has seen its shares rise 20 percent this year. This is a significant increase compared to the US stock market. The group’s value now stands at $12.6 billion. Since Friday, when Reuters reported Starboard’s plans to take on the Murdochs, its shares are up 5 percent. The hedge fund did not disclose the size of its investment in News Corp.
A News Corp spokesperson said that the company was committed to maximizing shareholder value and engaged with investors. “We are committed to executing our strategy, which has allowed us to achieve record profits over the last three years. “We are proud of the rapid digital transformation we have undergone and our bright prospects for growth and long-term value creation,” said he.
Investors have complained for years that the stock exchange values News Corp less than its sum — including newspapers on three continents as well as Dow Jones Financial Information Group, HarperCollins Book Publishers, and a majority share in Australian property listing group REA.
Murdoch’s family trust controls about 40% of News Corp voting shares. This is a concern to some shareholders, who claim that the ” Murdoch Discount ” keeps the value of the companies owned by the billionaire low compared to media peers. Starboard pointed out on Tuesday that the New York Times trades at a greater multiple of earnings than Dow Jones which owns the Wall Street Journal.
Murdoch, aged 92, handed over his power as co-chairman of News Corp to his son Lachlan last month.
Starboard’s entry comes after Murdochs tried in 2021 to combine News Corp and Fox, a move that would have united the two halves their media empire.
After opposition from independent shareholders in January, the Murdochs canceled the merger. Rupert Murdoch and Lachlan murdoch acknowledged that the combination “was not optimal” for the shareholders. This was a recognition of reservations from big investors who were concerned the merger might fail to realize the full value.
The next month, News Corp announced that the planned sale of a real estate asset — an opportunity for investors to unlock $3bn from this value — fell apart.
Robert Thomson, News Corp’s chief executive officer, announced that the company would be cutting staff by 5 percent this year due to macroeconomic challenges such as rising interest rates and inflation. News Corp’s revenues fell by 5 percent to $9.9 billion in the year ending June. Net income also dropped to $187 million, a 75% drop from the previous fiscal year.
Starboard is known for influencing software companies such as Salesforce or GoDaddy. Starboard’s stake in the media conglomerate follows a successful bet it made on Splunk last month, which was sold to Cisco for a staggering $28bn.