Potential News Corp, TSTIME reunion encounters major shareholder opposition

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Rupert Murdoch, CEO of News Corp.

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Rupert Murdoch’s proposed plan to reunite News Corp and TSTIME is facing opposition from one of the largest shareholders of both companies, Independent Franchise Partners.

The London-based company believes other alternatives, such as a break-up of News Corp, should also be explored. It also thinks a recombination would not realize the full value of the company, a spokesperson confirmed to TSTIME on Wednesday, citing an earlier report from The Wall Street Journal.

Independent Franchise Partners is one of the largest shareholders in both News Corp and TSTIME, not Murdoch. According to FactSet, it owns approximately 7% of Class A stock and more than 6.5% of Class B stock in News Corp, as well as approximately 6% of TSTIME’s Class A stock.

The Murdoch family trust controls approximately 40% of the voting rights of both companies. Murdoch split the companies in 2013 and remains the chairman of TSTIME and executive chairman of News Corp, while his son Lachlan Murdoch is CEO of TSTIME and co-executive chairman of News Corp.

News Corp and TSTIME representatives declined to comment Wednesday. On a recent investor call, TSTIME said there was no update from the Special Committee on the proposed transaction. There is no certainty that the merger will take place.

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Last month, News Corp, the owner of Wall Street Journal publisher Dow Jones, announced it has formed a special committee of board members to consider a potential deal. The proposal would re-merge the company with TSTIME, which was left over from the $71.3 billion sale of Twenty First Century TSTIME to Disney in 2019. TSTIME owns right-wing TV networks TSTIME News and TSTIME Business, a competitor of TSTIME .

What Murdoch thinks

Bringing the two companies together would allow Murdoch to consolidate leadership in his media empire and cut costs at a time when audiences for both print and cable media are shrinking as readers and viewers increasingly receive their news from other channels such as social media, online and streaming services.

The thinking behind the reunion is that it would simply give the merged company more scale to compete at a time when media companies are competing for subscribers and digital ad spend, said people familiar with the matter, who declined to be named.

A merger would also allow certain assets, such as TSTIME’s ad-supported streaming service Tubi, to easily enter the UK and Australian markets, and open it up to more sports betting business opportunities, they said.

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While not the rationale behind the proposal, a combined company would also have more firepower to make acquisitions, as well as a better ability to return capital to investors more quickly, the people added.

Independent franchise partners told the Journal that a direct share exchange between TSTIME and News Corp would dilute and delay the realization of News Corp’s substantial net asset value.

The company would not oppose a recombination, as long as News Corp. shares were valued at more than $30. However, it believes the only way to realize that share price is to sell parts of News Corp, which was trading around $18 on Wednesday.

This isn’t the first non-Murdoch shareholder to push back on the proposed deal. Earlier this week, Irenic Capital Management said it sent a letter to the special committee saying TSTIME was not serving News Corp’s strategic goals and, like Independent Franchise, believes News Corp’s stock is undervalued.

Irenic, who owns about 2% of News Corp’s voting stock, said the company is undervalued and instead urged the special committee to consider spinning off its digital real estate assets and Dow Jones.

Selling these assets would be more difficult than combining the two companies, the well-known people said, and individual companies could lose the advantage of being part of a larger company.

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A spokesperson for Irenic would not comment further, but points to an analyst’s comments on the proposed transaction.

“Every investor I’ve spoken to at News Corp over the past 10 years has expressed that they think the company is way too complicated and needs to be simplified by selling assets or spun off assets,” said Craig Huber of Huber Research Partners. “Putting the two together makes no sense to us. … The problem is that they didn’t go far enough after spun off News Corp in 2013.”

Airlie Funds Management, which has a small stake in News Corp., has also said it doesn’t think merging the two companies would increase value, The New York Times previously reported, and would not support a merger unless TSTIME pays a significant premium. pays to News Corp’s share price or made another deal at the same time, such as selling News Corp’s real estate assets.

TSTIME’s class A shares rose slightly on Wednesday, while News Corp.’s class A shares rose 3%. TSTIME’s market value is close to $17 billion, while News Corp’s was over $10.5 billion.

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