Activist Irenic launches News Corp. campaign, aiming for separation

Activist investor Irenic Capital has acquired a roughly $150 million stake in News Corp, aiming to push the company to separate the digital media business from its digital real estate assets, two sources tell Axios.

Why it matters: Inrenic could complicate Rupert Murdoch's plan to recombine Fox Corp. and News Corp

Of note: The sources confirmed the stake to Axios and the activist's campaign for changes.

• In addition to pushing News Corp. to separate the media and real estate assets, Irenic could also play spoiler to the reunification plan.
• If Irenic believes any Fox-News Corp. merger undervalues News Corp, it will oppose the deal, the sources said.
• News Corp declined to comment. The New York Times first reported Irenic's stake.

Details: The move by newbie Irenic, co-founded by an ex-Elliott Management analyst, comes just after Murdoch announced that News Corp. and Fox Corp. had formed committees to begin exploring a potential combination of the two firms.

The thesis: Irenic believes News Corp would be valued higher if its digital real estate practice, which includes a large digital real estate listings business in Australia, was separated from its media business.

• Its media business includes a majority of Australian newspapers by circulation, book publisher HarperCollins and Dow Jones, the publisher of financial titles such as The Wall Street Journal, Barron's and MarketWatch.

By the numbers: Irenic believes that News Corp should be trading at roughly $34 per share, compared to the roughly $15.60 share price it trades at today.

• News Corp owns a 61.4% stake in Australia's REA Group, which is valued at roughly $5.7 billion.

Meanwhile: Dow Jones had revenues of over $2.1 billion in fiscal year 2022, and over $433 million in earnings before interest, taxes, depreciation and amortization.

• The global revenue of News Corp. for that same time period was roughly $9.2 billion and its profits were over $1 billion, not including its investment in REA.

Background: Irenic was co-founded by former Elliott senior analyst Adam Katz and former Indaba Capital partner Andy Dodge. Sources say the firm has already engaged with members of the Murdoch family and their advisors privately.

• Irenic's stake makes it one of the top 10 largest shareholders of News Corp's Class B shares, a source told Axios. Rupert Murdoch and his son Lachlan co-chair News Corp.

What to watch: How and whether Irenic ratchets up the pressure. The activist may seize on Wall Street confusion around what kind of value could be created by a News Corp.-Fox combo.

• "We do not believe in sum-of-the-parts stories and combining Fox with News Corp’s assortment of assets likely won’t lead to any reset valuation and will even more likely complicate the narrative for investors," analysts Robert Fishman and Michael Nathanson of MoffettNathanson wrote Sunday.
• Wells Fargo noted on Friday: "If we've learned one thing from analyzing Murdoch assets historically, it's that the family looks to maximize value and is not emotionally tied to any properties...We can see opportunities for unlocking the portfolio and think investors are warmer to FOXA vs peers in part because of the willingness to transact."

Editor's note: The story was updated to add Wells Fargo's analysis.