This week’s 200th anniversary soiree for the Sunday Times gathered some of the biggest names in media at the headquarters of the British Academy of Film and Television Arts in London’s Piccadilly to celebrate one of the jewels of Rupert Murdoch’s empire.
But talk of famous front pages and scoops among guests at Monday night’s event, where the attendees included News Corp boss Robert Thomson and News UK chief Rebekah Brooks, was overshadowed by the news that broke three days earlier: the mogul’s plan to reunify his media empire.
After a lifetime of deals, Murdoch, now 91, is making perhaps his final play as he seeks to merge News Corp – home to the Times, Sun, Wall Street Journal and the Australian – with Fox, broadcaster of Fox News and crown jewel NFL games, as he hands the running of his empire over to eldest son, Lachlan.
While the 51-year-old heir, who shocked his father by abruptly leaving the family business in 2005 to move to Australia and pursue his own interests before being enticed back a decade later, is primed to become chair, there is plenty of chatter over who will get the top job running the day-to-day business.
Thomson had long been mooted as the one to manage the combined group after a merger – he is Rupert’s right-hand man and the fellow Australian considers him practically a son. But with Lachlan in the driving seat, that is not to be.
Then there is Brooks, another Rupert favourite who has long held ambitions to rise further. However, she lacks international experience, and has the issue of the phone-hacking scandal on her CV, with new allegations brought recently relating to her tenure as Sun editor. (News UK has always denied any hacking took place at that newspaper, saying it only happened at its sister title, News of the World.)
“Lachlan is not going to be running the business day to day. The really interesting question is, who will be?” said a source. “I think it will be Lachlan’s decision who does, not Rupert, and that makes it interesting. Robert has historically been protected, but Rebekah is also powerful – she is the only person all the children talk to. She’s like another sibling and is very close to Lachlan.”
Lachlan, who insiders say was against the decision to downsize the empire by selling 21st Century Fox’s global entertainment assets to Disney for $71bn (£63bn) five years ago, is seeking to rebuild scale in an era of global tech and media giants.
“Lachlan was furious,” says one former senior executive. “I think it was the nail in the coffin when [his brother] James supported it too. James and Lachlan, no matter what anyone says, did get along. After that they stopped speaking. I believe that is still the case now. A scaled-down News Corp is the opposite of what he wants.”
The sale of 21st Century Fox also carved the younger James, once seen as heir apparent, out of the line of succession and ended any possibility of a future potential dynastic struggle.
The 49-year-old resigned from the board of News Corp two years ago, citing “disagreements” over editorial content, understood to include coverage casting doubt on climate change, severing his last formal link to the empire created by his father.
A reunified News Corp and Fox, valued at $9.7bn and $16bn respectively, would create a more muscular $26bn business. This would put it on a par with the market capitalisation of the freshly minted Warner Bros Discovery ($30bn), albeit still a relative minnow compared with beasts such as Disney ($180bn) and Comcast ($134bn), which bought Murdoch’s Sky for £30bn four years ago.
Special boards at each company are now evaluating the merits of a merger, and the relative value of each company to the other in the proposed all-stock deal, but banks and shareholders seem to have made up their mind already.
Investors in Fox and News Corp both believe they are undervalued – shares in each are down 30% over the last year – something analysts suggest a tie-up probably will not solve.
There is also the cautionary tale of the similar recombination of CBS and Viacom after 13 years of separation. The business, now called Paramount, is valued at $12.5bn – less than half the value of the separate businesses before the deal.
“On a standalone basis, this transaction raises more questions than answers as we struggle to see the strategic rationale for combining these two companies,” said Jessica Reif Ehrlich, an analyst at Bank of America, summing up the wider market reaction.
Some investors in the News Corp camp are concerned about the “toxicity” of the rightwing Fox News, and the practical matter of the two multibillion-dollar lawsuits it faces over allegations that it promoted the spread of theories that the US election in 2020 was rigged.
Meanwhile, some Fox investors balk at tying the hugely profitable business to a primarily publishing operation, regardless of the leaps and bounds it has made striking commercially lucrative ad deals with Silicon Valley giants such as Google.
Analysts at MoffettNathanson put Fox on track for record profits of $3.3bn next year, while News Corp made $1.6bn in profits in the year to the end of June, a 31% increase.
To get a deal through will require a majority of non-Murdoch family shareholders.
“There will be some investors in the margin that will have a problem with Fox News in their portfolio,” said a second source. “And the Wall Street Journal [staff] loathes Fox News, they see it as toxic, silly, and think it would harm their brand. But in the end it won’t be overly consequential because Fox News is so damn profitable.”
However, with the Murdochs’ family trust controlling 39% of the voting shares in News Corp and 42% in Fox Corporation, there are good odds they will get their way if the plan gets as far as being put to a shareholder vote.
“I think this has been in the works for two years,” said the former senior executive. “I give it a 75% chance it will happen, 25% that it will be blocked. It’s all about Lachlan. Rupert is in his 90s – this is his last deal, it’s succession planning.”
When the Rupert era ends, the power behind the family trust will be equally split between his four eldest children – Lachlan, James, Elisabeth and Prudence – while his two youngest daughters, Grace and Chloe, are financial beneficiaries.
Whether such a setup could see a situation emerge akin to HBO’s hit drama Succession, which features members of a powerful family vying for control of a sprawling media conglomerate that has drawn endless comparisons with the real-life Murdochs, remains to be seen.
But for now, for Rupert, merging the two businesses he was forced to split against his will almost a decade ago after the phone-hacking scandal is about securing a family legacy after seven decades of deal-making.
“At a certain level of money, it is control that matters the most,” says Claire Enders, founder of Enders Analysis and a longtime Murdoch watcher. “What this transition is about is future control and restoration of the original structure of News Corp and a long-term umbrella for the newspaper assets.”
Despite the negative sentiment from investors and Wall Street about the rationale behind the merger, sources close to Murdoch say the deal is all about business, not family.
“The proposal is 100% based on business rationale which is a combination of complementary portfolios of premium content to create a global leader in news, live sports and information,” said the source. “Any commentary that implies it has to do with succession planning is absurd and comes from sources with no knowledge of the strategy and intent.”