Oct 18, 2022 - Economy

Murdoch merger eyes sports betting, News Corp. brand

Data: Yahoo Finance/Axios research; Table Jacque Schrag/Axios

The potential combination of the Murdoch family's newspaper empire and TV business would likely retain the News Corp. branding and would trade on the Australian Securities Exchange (ASX), sources told Axios. Expansion into sports betting and book publishing would be among the growth areas targeted.

Why it matters: The proposed transaction would be structured as a combination of two controlled companies via an all-stock agreement, not too dissimilar to the deal to bring CBS and Viacom back together in 2019.

Driving the news: News Corp. and Fox Corp. filed separate notices to securities regulators Friday stating that they had each formed committees to begin exploring a potential combination of the two companies, which were split in 2013.

  • The rationale behind the merger would be to streamline two sets of content portfolios across global news and sports.
  • Costs saved from the combination would allow for more investments into emerging businesses on both sides, including sports betting, book publishing and digital subscriptions, the sources said.

For example, Fox News Books — the publishing arm of Fox News Media — could find synergies with News Corp.'s book publishing arm, HarperCollins.

  • The sports betting efforts from News Corp.'s Foxtel, an Australian pay television company, could be combined with the betting operations at Fox Bet, a partnership between Fox Sports and betting operator The Stars Group, sources said.
  • Despite activist investor pressure to spin out its real estate arm, News Corp.'s digital real estate platform business could find ways to integrate the content from Credible, the consumer finance marketplace in the U.S., majority-owned by Fox Corp., that helps consumers with loans and mortgages.

Be smart: Lachlan Murdoch, the eldest son of media tycoon Rupert Murdoch, is poised to oversee the potentially-combined company, the sources said.

  • Ultimately, the logistics of how the management team will be structured will be left to the special committees, one source said.
  • Lachlan Murdoch currently serves as co-chairman of News Corp and executive chairman and CEO of Fox Corp.

By the numbers: Each company said it had formed a special committee following the receipt of letters from Murdoch and the Murdoch Family Trust, which has a 39% voting stake in News Corp and a 42% voting stake in Fox Corp.

  • News Corp has a market cap value of $9 billion, and Fox is worth nearly $17 billion. The newly combined company would bring it closer in size to media giants like Warner Bros. Discovery, which is worth $30 billion.

The big picture: The potential combination of Rupert Murdoch's newspaper empire and TV business, after breaking them apart nearly a decade ago, could signal a cold winter ahead for traditional media companies.

Of note: While dividing two companies seemed apt in 2013 — a year after the infamous phone hacking scandal plagued News Corp. — the stress facing the newspaper and television industries today makes a combination seem logical.

  • Fox Corp. sold its entertainment assets to Disney for $71.3 billion in 2019, leaving focused on live sports and television news. But as Big Tech continues to bid for sports rights, live games and matches have become more expansive.
  • News Corp. has been focused on diversifying its revenue across digital real estate, books and data services, in addition to digital news subscriptions. But Wall Street has not rewarded News Corp's diversified strategy in the same way it has praised The New York Times' sole focus on subscriptions.

Between the lines: Some analysts have argued that a combination wouldn't meaningfully drive up the value of either entity. Others believe that reintegrating two well-run companies with common ownership, would be a relatively easy integration and that the timing makes sense.

  • Unlike its rivals, Fox Corp. never tried to build its own massive subscription streaming service, saving it from some of the market blowback this year faced by companies like Netflix, Paramount and Warner Bros. Discovery.
  • And while News Corp.'s struggled to curry the same favor with Wall Street as The Times, it has continued to excel from a business perspective. The company posted record revenue and earnings last fiscal year.

The bottom line: Even if the two companies were to combine, their collective scale wouldn't be enough to fundamentally challenge Big Tech rivals. But it would help the two companies streamline costs ahead of an economic downturn.

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