Rupert Murdoch had one more blockbuster deal in him. And it might be the grizzled veteran’s sweetest yet.
The 87-year-old mogul is poised to complete a $71 billion sale of selected 21st Century Fox Inc. assets to Walt Disney Co. While Murdoch’s track record is mixed — the 2005 investment in MySpace was a half-billion dollars he never saw again — this transaction will cement his legacy as one of the media world’s top wheeler-dealers. After competition from Comcast Corp. pushed Disney to boost its winning bid, Murdoch stands to add about $3 billion of Disney stock to what Bloomberg Billionaires Index estimates is already a $18.1 billion fortune.
Murdoch is “one of the all-time greats,” Discovery Inc. Chief Executive Officer David Zaslav said last week in an interview at Allen & Co.’s annual media conference, which was attended by Murdoch, his sons James and Lachlan, as well as the CEOs of Disney and Comcast, Bob Iger and Brian Roberts.
’Twas Drama
Getting the deal done wasn’t always a streamlined process. There was drama along the way. When Murdoch and Iger met for a friendly chat in August at Murdoch’s 13-acre Moraga Estate vineyard in Los Angeles, they reflected on the challenges of the rapidly evolving media industry and discussed potential solutions, including a deal between the two companies, according to regulatory filings.
Fox opted to sell pieces of its empire. They include the movie studio, cable networks like FX, stakes in streaming-video company Hulu, broadcaster Sky Plc, and interests in Star India and National Geographic. Disney would buy, then sell, Fox’s regional sports networks to meet regulatory requirements.
What was left, called “ New Fox,’’ would be spun off and led by elder son Lachlan. New Fox includes the cable-news division, starring Sean Hannity and Tucker Carlson, national sports channels and the U.S. broadcast channel, famous for shows such as “The Simpsons’’ and “American Idol.’’
The Murdoch family could net as much as $11.8 billion from the deal. That doesn’t include the 17% stake in New Fox. Though other analysts have a more conservative valuation, Bloomberg Intelligence says New Fox is worth about $17 per share, or $31 billion.
Comcast Persistence
In December, Fox accepted a Disney bid of $29.54 a share. Proxy adviser Institutional Shareholder Services Inc. said the initial sales process was “suboptimal.’’ Fox’s “apparent preference toward a deal with Disney clearly failed to extract maximum value for shareholders,” ISS added.
Fox investors have the persistence of Comcast’s Roberts, and his unsolicited $35-a-share offer, to thank for ultimately forcing Disney to sweeten its bid by 28.6 percent, to $38 a share. That translates to a 56% premium to the value of Fox shares on Nov. 3, 2017, the day before the sale discussions went public, said ISS, which along with shareholder adviser Glass Lewis & Co., says investors should support the deal when they vote on July 27.
Murdoch has done a “masterful job,” said Paul Sweeney, a Bloomberg Intelligence analyst. “He is getting pretty heady multiples.”
Comcast declined to comment. So did Fox. Disney didn’t return calls.
Largest Shareholder
The Nevada-based Murdoch family trust, which holds a 17% stake in all of Fox’s outstanding shares, will walk away with an equivalent share after the sale, which Disney has proposed to be part in cash and part in Disney shares. The Murdochs could end up owning 7.6% of Disney, enough to be the largest shareholder. They will, however, face a federal tax bill if they take cash. Antitrust regulators have already blessed the transaction.
One way to illustrate the success of the sale is to look at the value of Sky. The British satellite operator is trading at about 13.5 times earnings before interest, taxes, depreciation and amortization. That’s better than most other European telecom and cable deals in recent history, according to Matthew Bloxham of Bloomberg Intelligence.
In December 2016, Murdoch offered 10.75 pounds ($13.99) a share for what it didn’t own of Sky. Disney’s latest bid of 14 pounds a share for a stake was one pound more than what Fox was willing to offer, according to regulatory filings.
More good news for Murdoch: Rival Sinclair Broadcast Group Inc.’s plan to buy Tribune Media Co. was thrown into jeopardy on Monday by the U.S. Federal Communications Commission, which questioned the legality of the deal and proposed a hearing that could kill it.
Discovery’s Zaslav was effusive in his praise of Murdoch, putting him on a par with his boss, John Malone, the 77-year-old backer of cable company Liberty Media, the Discovery Channel and the Lions Gate movie studio.
“I think John Malone and Rupert Murdoch built this business together,” Zaslav said last week at the Allen & Co. media conference in an Idaho resort. “Without Rupert and without Malone, we all wouldn’t be here in Sun Valley.” — Bloomberg