Activist investment firm Starboard Value is advocating for significant structural changes at News Corporation, particularly urging the separation of its real estate operations from its core media business. During an interview with CNBC, Starboard CEO Jeffrey Smith disclosed that the firm has begun acquiring shares in News Corp and is engaged in discussions with the company regarding this strategic shift.
Smith emphasized the potential benefits of spinning off News Corp’s real estate assets, which include a stake in the REA Group in Australia. He believes that such a separation would allow the company to better showcase the value of its real estate division, which he described as a “beautiful business.” Currently, News Corp encompasses various media assets, including the Dow Jones news division, which publishes prominent outlets like The Wall Street Journal and the New York Post.
In response, a spokesperson for News Corp reiterated the company’s commitment to maintaining an open dialogue with investors and highlighted its recent profitability records. The spokesperson stated that the company is focused on executing its strategic plan, which has positioned it for long-term growth and value creation.
Despite Starboard’s intentions, the Murdoch family trust retains significant control over News Corp, holding approximately 40% of the voting rights, which complicates any potential changes. Smith criticized the dual-class share structure, suggesting it hinders effective governance and value creation.
He pointed out the stark valuation discrepancies between News Corp’s media and real estate segments, noting that the news division trades at four times earnings before interest, taxes, depreciation, and amortization (EBITDA), while the real estate assets command eight times. Smith asserted that the current valuation of News Corp’s stock is undervalued, expressing confidence that a separation could unlock substantial shareholder value.
This call for change follows Rupert Murdoch’s recent announcement of his retirement as chairman of both News Corp and Fox Corp, with his son, Lachlan Murdoch, set to take over leadership.
