Media tycoon Rupert Murdoch sold ~5% of his family's total stake in News Corp (NWSA) on 20th November through a sale of more than 418k class A shares but he has retained 40% of class B (NWS) shares while his Saudi friend Prince Alwaleed Bin Talal owns 7%. Since class A shares did not have any voting rights anyway, the Murdoch family will remain at helm of the company's affairs.
In other news, News Corp is acquiring a 49% stake in YES Network for an estimated $1.47 billion in which shareholders such as Goldman Sachs (GS) and Providence Equity are executing their exit strategy for a tidy 400% return on their original investment. This implies that the network, essentially built to broadcast New York Yankees games for the next thirty years, is valued at ~$3 billion.
Meanwhile, News Corp has been working to create a newspaper publishing spinoff which will include News International, HarperCollins, and Dow Jones & Company. Now it is looking to acquire publisher Simon & Schuster from CBS Corp (CBS) which would then become a part of HarperCollins. Although several other companies have approached CBS before as well for Simon & Schuster they have walked away due to disagreements in valuation. With a dying industry like printed materials, time is the great humbler of the Picasso Premium. After being forecast for years, 2012 looks to be the year in which the great publishing industry consolidation occurred. The most significant of which was the merger of Pearson, the owner of Financial Times and Penguin Books, with Germany based Bertelsmann, owner of Random House. News Corp itself also wanted to buy Pearson but it chose to merge with Random House instead.
Then in early June this year, News Corp purchased the remaining 50% of the shares of its joint venture with Disney (DIS), the Asian sports network ESPN Star Sports. ESPN Star, in which Disney had the controlling stake, operates in more 24 Asian countries, has 28 networks and is dominated by cricket. Disney on the other hand has clarified that this is not the company's exit strategy from the region rather it wants to pursue new Asian projects solo.
Enterprise Value (billion)
News Corp has been rallying in the U.S. in the midst of these takeovers with its stock climbing by 36.2% at NASDAQ. However, despite the string of acquisitions by Mr. Murdoch, the phone hacking scandal that broke last year is far from over and looks to once again capture headlines as Judge Brian Leveson will release his inquiry report on 29th November which may lead to new regulations for the U.K.'s press. In addition, the former editors of News International are facing charges of making illegal payments of $160,000 to a British public official between 2007 and 2011. This has raised the possibility of News Corp being charged in the U.S. under the Foreign Corrupt Practices Act (FCPA). The apparent expansion of the company has created an impression that the scandal is now in the past but these new allegations have once again reminded us that Mr. Murdoch's chairman seat is not permanent. They have come at a time when
a) The company was preparing for a spinoff
b) These successful acquisitions had quelled shareholders' call for a new, independent Chairman.
All of these deals make it clear that News Corp realizes that the only way they can have leverage in the broadcast content market with advertisers is to control all of the valuable sporting properties out there because live sports is the only form of entertainment left that requires someone to be in a particular place - in front of his TV/Computer - as a particular time. How else can they guarantee eyeballs to advertisers without that anymore? News? Not unless it's a spontaneous event or natural disaster.
These moves by News Corp are savvy even if they have a short lifespan under the current distribution model. If you control the content it doesn't matter who distributes it.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.