Asset manager T. Rowe Price, one of the largest holders of News Corp, has come out against Rupert Murdoch’s plan to unite his media empire, joining at least two other investors disgruntled with the idea.
T. Rowe Price, the largest investor in News Corp after the Murdoch family, has strong reservations about the company’s plan to merge with Fox Corp, according to a New York Times report. The asset manager holds a stake of 12% in News Corp.
A merger between the two media companies would probably undervalue News Corp, T. Rowe Price said, pointing out that the Murdoch family owns a bigger share of Fox than News Corp. Murdoch’s family trust controls 40% of each company through super-voting Class B shares.
The two media companies are weighing a combination proposed by Murdoch, who believes increased scale would help both businesses save money and better compete in emerging business lines such as sports betting.
However, investors are not convinced the tie-up makes strategic sense and are worried about the deal undervaluing News Corp. Activist fund Irenic Capital Management and Independent Franchise Partners share such views. Both firms would rather see News Corp divesting some of its key businesses to close the valuation gap plaguing its stock.
Last week, Irenic said a spin-off of its digital real estate business or Dow Jones could help News Corp inch closer to a valuation of $34 per share. Days later, Independent Franchise suggested News Corp divest its Dow Jones unit, which includes The Wall Street Journal, and possibly other businesses, before combining with Fox.
News Corp shares were slightly up at $18.74 each in morning trading Monday in New York.
T. Rowe Price portfolio manager Vincent DeAugustino told The New York Times that his firm wants News Corp to consider all of its options, including those presented by Irenic and Independent Franchise. Still, DeAugustino said that the best way forward might be to hold off, given the current macroeconomic uncertainty.
Aside from worries about a merger assigning an unfair value to News Corp, T. Rowe Price is understood to also have concerns about the potential financial consequences of the litigation against Fox stemming from its coverage of the 2020 U.S. presidential elections. Two voting machine companies are suing Fox News for damages exceeding $1 billion.
“It stands to reason, given the high degree of sensitivities here, that there would be a lot of external pressure by shareholders as the special committee performs its work,” DeAugustino said.