Four years after Disney windfall, is the Murdoch family ready to sell again?

Shares down, revenues sliding, subscriptions flattening: looks like the Murdochs need one of their famous rabbits-out-of-the-hat if they want to rescue a bit of cash out of News Corp and Fox. 

That can only be bad news for legacy assets like Australia’s newspapers.

It’s been just over four years since the Murdochs’ 20th Century Fox sold its entertainment and broadcast assets to Disney. That’s a long time between drinks for a dealmaker like Rupert. With most of its legal cases being settled and problematic staff moved on, are the Murdochs getting ready to sell their media assets? 

Some Fox “insiders” seem to think so, as they try to make sense of the still-unexplained decision to fire top-rating host Tucker Carlson or of the pattern of on-again-off-again corporate restructuring. 

Memories of the Disney sale would remind the Murdochs of two rules in corporate mergers and acquisitions: every asset is for sale at the right price, and sellers usually do better than buyers.

The sellers get to take away the inflated takeover margin, while the buyer is left with the challenge of “leveraging scale” out of the “synergies” between old assets and new. Four years on, there are grumbles on the Disney side: it was “materially overpaying”, says dissident investor Nelson Peltz.

How inflated was the price? According to one study, as bidding between Disney and Comcast pushed up the price in 2018, the Murdochs became big winners: “Of the value created, more than $4.8 billion belonged to Mr Murdoch personally. In one weekend when competing bids were announced, his wealth increased by approximately $1.9 billion.” 

For the Murdochs, cashing out also bought family peace with the US$10 billion’ worth of Disney shares that ended up with the family on a swap of the Fox shares divided among the six children. It’s been grim pickings since then: four years on, that US$10 billion-odd in Disney shares is worth about, umm, $10 billion, and still frustratingly dividend-free. Worse, there’s the regret of knowing that those shares shot up, all too briefly, to about $20 billion in March 2021 when streaming seemed all up-side.

The sharemarket seems to be losing patience with the residual Murdoch companies. Since early February, shares in News Corp and Fox Corp have fallen about 15%, off the back of what’s been described as “erratic” decision-making — both corporate and personal. 

Lift the lid and the fall in their traditional media is worse. News Corp increasingly looks like a holding company for digital real estate assets — 61.5% of Australia’s REA Group, as well as Move in the US. (A sale of Move for US$3 billion fell through in February.) While News shares have gone down, REA Group has kept going up — another 10% in the past three months. 

Getting Fox and News off their hands at a reasonable price would (post-Rupert) leave each of the Murdoch children with about US$1 billion. Of course, they’d have to give up the political clout that the media assets have delivered, but none seem to share their father’s enthusiasm for wielding power.

There are three equally tricky paths to get there: find a buyer prepared to take over the companies as a whole; find someone prepared to buy out the Murdoch shareholding in each company; do the hard grind of breaking the companies up. 

Expect any change to be bad news for the struggling Australian media assets — particularly the tabloids and Foxtel. News Corp’s latest quarterly figures (released last Friday) show Australian revenues are down (due to currency fluctuations, the company says).

While the 10-year program to shift newspaper readers to digital subscribers is back up after last quarter’s fall, it’s slowing, still short of the 1 million target. Foxtel streaming subscriber numbers are up, but pay TV is down, along with average revenues per user.

News Corp has said it would continue to cut costs as part of the program announced in February, when it indicated that one in 20 staff on its Australian mastheads would go. March figures show it’s already paid out about US$25 million in employee termination benefits — with more to come. The sharemarket liked that, giving the shares a much-needed edge up.