News That Matters

As Fox and News Corp Weigh Merger, an Activist Has Its Own Vision

As News Corp and Fox ponder a merger proposal submitted by Rupert Murdoch, the chairman of both companies, an activist investor is pushing for a say in the matter.

The investor, Irenic Capital Management, wants News Corp to explore splitting its online real estate listings unit from its other businesses, which include The Wall Street Journal, HarperCollins and The New York Post. It has requested a meeting with the special committee that the company formed to evaluate Mr. Murdoch’s proposal, said Adam Katz, one of Irenic’s founders.

The fund, Mr. Katz said, is one of the 10 largest holders of News Corp’s Class B shares, which confer stronger voting rights than the more numerous Class A shares. News Corp has a market capitalization of roughly $9 billion.

Irenic “looks forward to engaging with the company’s special committee to ensure it explores all paths to maximizing value, including a separation of its pre-eminent digital media and digital real estate assets,” Mr. Katz said.

News Corp’s real estate listings business includes a 61.4 percent stake in REA Group worth roughly $5.7 billion. The company, which is publicly traded in Australia, employs more than 3,000 people. It operates the residential property website, the commercial property website and the share property website

News Corp’s digital real estate business generated about $1.7 billion in revenue last year, or about 16 percent of News Corp’s roughly $10 billion in revenue.

News Corp declined to comment.

Irenic, which was founded by Mr. Katz and Andy Dodge, believes the media and real estate businesses would be better off as separate companies. It contends that News Corp has grown into a diversified business, with footholds in information services and digital subscriptions, which have not been properly valued by investors. Shares of News Corp have fallen about 33 percent over the last year.

Irenic’s push follows Mr. Murdoch’s proposal to merge the companies nearly a decade after splitting them apart. Mr. Murdoch sees new ways to integrate the companies’ media properties, which include Fox News, The Wall Street Journal and the Fox broadcasting network, as well as opportunities to save costs.

Both companies confirmed last week that they received Mr. Murdoch’s proposal, each saying they had appointed a special committee to review any potential transaction. Robert Thomson, the chief executive of News Corp, told employees there was “no certainty” of any deal.

Shares of News Corp fell about 2 percent in aftermarket trading on Friday. Shares of Fox were down half a percent, giving it a market capitalization of about $17 billion.

Without Murdoch family support, Irenic may face an uphill battle. Rupert Murdoch’s son Lachlan is co-chairman of News Corp, alongside his father, as well as the executive chairman and chief executive of Fox. The Murdoch Family Trust, which Rupert Murdoch controls with his eldest children, owns 39.5 percent of the company. The family’s control stems largely from its ownership of its Class B shares.

Mr. Katz of Irenic is a former senior analyst at the hedge fund Elliott Management, one of the most prominent activist investors. Another activist fund, ValueAct, disclosed a position in The New York Times this year and is pushing for the company to sell its subscription bundles more aggressively.

News Corp would still be a media colossus without its real estate business. The company’s other units include Dow Jones, which generated about $2 billion in revenue last year from properties including The Wall Street Journal, and its information services unit, which includes the intelligence provider Factiva. Dow Jones generated about $433 million in earnings before interest, taxes, depreciation and amortization this past year.

The remaining media businesses would include The New York Post, The Times of London and the HarperCollins publishing business, which generated about $2.2 billion of revenue last year.

Benjamin Mullin contributed reporting.

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