Big Shareholders Opposition Complicates News Corp-Fox Combo

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A major outside shareholder in News Corp and Fox Corp. opposes a plan by Rupert Murdoch to recombine the companies and wants other alternatives considered, including a breakup of News Corp.

The Wall Street Journal reports Independent Franchise Partners, a London-based investment firm and one of the largest non-Murdoch holders of both News Corp and Fox, said it told a special committee of News Corp’s board last month that it thought a combination on its own would fail to realize the full value of the company. It believes any combination should be done in conjunction with the sale of some of News Corp’s most valuable business units.

Murdoch’s family trust controls roughly 40% of the voting rights of both companies. Both have dual-class structures, with the family trust mainly holding class B shares, which have more powerful voting rights.

News Corp, in addition to owning The Wall Street Journal, the Times of London and HarperCollins Publishers, is a major player in online real-estate listings through Realtor.com and other properties. It also owns Australian cable-television network Foxtel.

Another shareholder, Irenic Capital, has also publicly questioned the deal and has pushed the company to consider separating its digital real-estate assets and Journal parent Dow Jones. Some other News Corp shareholders are aligned with that view, according to people familiar with the matter.

Opposition to the deal has the potential to complicate Murdoch’s plans to realign his family holdings.

News Corp has said a majority vote of the stock of non-Murdoch-family shareholders is required for the deal to go through.

In October, Mr. Murdoch proposed a recombination of News Corp and Fox, owner of the Fox News cable channel among other properties, without providing details such as a price. Special committees of the boards of both companies are examining the proposal.

The rationale behind the move is to take advantage of bigger scale to pursue acquisitions, compete for digital ad spending and pursue a sports-betting business, people familiar with the proposed deal have said. Some of the people have also cited cost savings from having a single corporate structure.

Both companies have struggled to excite shareholders. Shares of News Corp are down more than 20% this year and trade not much above their debut price from 2013. Fox shares are similarly depressed.

In a statement to the Journal, Independent Franchise Partners said a “straight equity exchange between Fox Corp. and News Corp would dilute and delay the realization of News Corp’s substantial intrinsic value.”

The investment firm has advised News Corp behind the scenes since at least July 2020 on ways to reduce what it sees as undue corporate complexity. The firm has met in the past with News Corp co-Chairman and Fox Chief Executive Lachlan Murdoch and News Corp Chief Executive Robert Thomson, according to people familiar with the matter.