Fox Corporation Chairman Rupert Murdoch has withdrawn his proposal to recombine Fox with News Corp, Fox announced on Tuesday.
In a letter to the company’s board of directors, Murdoch said he and Fox Corp. CEO Lachlan Murdoch have determined that a combination is “not optimal for the shareholders of FOX and News Corp at this time.”
The idea to reunite the companies was put forth last October, when both Fox and News Corp formed special board committees to evaluate the deal. Those committees have been dissolved as of Tuesday.
Fox was originally part of News Corp until 2013, when News Corp was split into two separate companies. News Corp’s media assets – including Fox’s TV networks – were spun off into 21st Century Fox (most of which was sold to Disney in 2019), while the remaining half retained the News Corp name but focused on publishing.
News Corp’s current assets include Dow Jones & Company, which publishes The Wall Street Journal, News Corp Australia, News UK – home to media personality Piers Morgan – and Realtor.com. News Corp is reportedly in talks to sell its online real estate business Move Inc. for $3 billion to CoStar Group.
Murdoch’s decision to withdraw the merger proposal isn’t surprising at all, according to Bloomberg Intelligence Analyst Geetha Ranganathan.
“We kind of suspected all along that the majority of the minority shareholders would actually not be in favor of this proposal,” she told Bloomberg TV, adding perhaps the Murdochs wanted to “beef up” Fox’s pay TV assets with News Corp’s digital exposure.
Fox has a foothold in the digital space with Tubi, its free ad-supported streaming TV (FAST) service. Tubi boasted nearly 30% revenue growth during the September 2022 quarter and its FAST channel tally stands at over 200.
“Pay TV is under tremendous pressure in the U.S.,” Ranganathan said. “But at the end of the day, I think most investors felt that it would just complicate the story, not simplify it.”
Analysts from Wolfe Research noted the rationale for a Fox-News Corp merger was that “the combined balance sheets would provide enough scale to pursue other opportunistic deals, with sports betting called out as an example of assets that could leverage both companies' strength in news and sports.”
“While News Corp. was to blame for not holding up its equity in the relationship during the first marriage, the company has had quite the makeover and now finds itself quite attractive to more than the Murdoch Family Trust,” said Wolfe Research’s Peter Supino in a note to investors, pointing to the potential Move Inc. sale.