What's next for Rupert Murdoch after Fox-Disney deal?
Just when Wall Street pundits think they've figured out Rupert Murdoch, the 86-year-old media tycoon throws them a curveball -- like selling most of 21st Century Fox's (FOXA) entertainment assets to Walt Disney (DIS) for $52.4 billion. The question now is: What will happen next?
New York-based Fox plans to focus on news and sports as it exits businesses such as movie and TV production, which are being increasingly dominated by free-spending rivals such as Netflix (NFLX) and Amazon (AMZN). The company is retaining Fox News, the most-watched and profitable cable news network; Fox Business, which topped CNBC in the TV ratings for the first time this year; sports network FS1 and real estate holdings such as the storied 20th Century Fox backlot.
Fox will control 25 percent of Disney when the deal closes, making it the media and entertainment giant's largest shareholder.
After the deal, Murdoch's company will be called Fox and will generate annual revenue of $10 billion of earnings before interest, taxes, depreciation and amortization (EBITDA) of $2.8 billion. Though Rupert Murdoch bragged during a conference call with Wall Street analysts about Fox's "next great leg of our journey," neither he nor his sons, James and Lachlan, who are also senior executives in his media empire, offered much in the way of specifics.
"That would be an awfully intriguing company," said Mario Gabelli, founder and CEO of GAMCO Investors, which manages about $36 billion in assets and has followed Murdoch since the 1970s. "He's going to have 100 million shares of Disney, and he figures Disney stock can go to $150 [from its current level of $111], so he's going to have $15 billion worth of Disney [shares]."
For instance, analysts have speculated that the Murdochs might reunite Fox with its corporate sibling News Corp (NWSA), which holds the family's publishing assets, including the Wall Street Journal, New York Post and the Times of London. The two enterprises were split in 2013 because of the papers' lackluster growth, a move that other publishers such as Gannett (GCI) and tron Inc. (TRNC, formerly Tribune), have made
Murdoch remains passionate about the news industry since he started his career as a newspaper publisher in his native Australia and still has a dominant position in that country's market. He described himself as a "newsman with a competitive spirit" in a recent conference call with Wall Street analysts. However, when pressed about a potential reunification of Fox and News Corp, the elder Murdoch responded: "If we do it, it's way, way in the future."
Gabelli, for one, isn't sold that Fox and News Corp would be better off together. "I am not as convinced that I want to own all those assets in Australia that I am going to get as part of that deal," he said.
Media watchers have chronicled feuds between Rupert Murdoch and his children and the fights among his progeny for years.
James and Lachlan Murdoch have two sisters, Elisabeth and Prudence, and each has equal voting rights in the Murdoch Family Trust, which controls the family business interests. They divide their interest with their younger half-siblings, Chloe, 14 and Grace 16, Murdoch's children with ex-wife Wendi Deng.
Writing in The Hollywood Reporter, Murdoch biographer Michael Wolff argued that the mogul has been "obsessed" with leaving his business to his children ever since he almost went bankrupt in the 1990s. Unfortunately, family harmony has proved to be elusive,
"The corporate-family dynamic that's developed is one in which James has become the most tenacious and dominant member of the family. ... Indeed, his power has often come from opposing his family -- including his father and brother, both of whom he has often publicly contradicted and criticized," Wolff wrote. "Everybody, resentfully, gets out of James' way."
James Murdoch has reportedly discussed taking on a senior role at Disney, though Disney CEO Robert Iger hasn't made a formal offer yet. According to Gabelli, Disney would be wise to offer the younger Murdoch a position given his knowledge of international markets such as India. Disney could consult with Rupert Murdoch when it searches for a replacement for Iger, who delayed his retirement until 2021 as part of the deal.
A spokesman for 21st Century Fox didn't respond to a request for comment for this story.
