Rupert Murdoch’s transition of power at News Corp. to his son Lachlan is being challenged by a major shareholder in the media company.
Hedge fund Starboard Value went public with a letter addressed to shareholders of the newspaper giant, owner of The Wall Street Journal and New York Post, calling on the company to eliminate its dual-class share structure and referencing a brewing Murdoch family standoff. The timing of the letter arrives a day before Lachlan is set to address investors at a Goldman Sachs conference on Sept. 10.
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“This transition of power from Rupert Murdoch to his children has allowed for complicated family dynamics to potentially impact the stability and strategic direction of News Corp,” read the letter signed by Starboard’s Jeffrey C. Smith. “Murdoch family’s ownership in News Corp is managed by the Murdoch Family Trust … which is reportedly controlled by Rupert Murdoch and four of his children. Recent press reports have described a legal battle over ongoing control of the Trust, with Rupert and Lachlan Murdoch on one side, and three of Rupert Murdoch’s other children on the other side.”
Smith added, “We believe, and reports have highlighted, that one of the root causes for the conflict is disagreement over the future strategic direction of News Corp and Fox Corporation. This uncertainty represents a risk to shareholders that is only amplified by the Murdoch family’s super-voting shares and the poor governance and oversight that stems from the dual-class share structure.”
Last September, the elder Murdoch, 93, announced that he was stepping aside as chairman from the companies he built, Fox Corp. and News Corp. and would be taking an emeritus title.
After the sale of most of 21st Century Fox assets to Disney for north of $71 billion in 2019, Lachlan Murdoch took over “new Fox” (Fox broadcast network, TV stations, Fox News and Fox Sports) as CEO and also leads News Corp, which also owns publishing major HarperCollins, as chair.
The move preceded a closely watched court battle that’s playing out in Nevada over how Rupert’s empire should be controlled and who should be the primary decisionmaker, one that reportedly sets up a standoff between Lachlan and other Murdoch siblings James, Elisabeth and Prudence. (James had led 21st Century Fox from 2015-2019 until the Disney deal closed and since then has run his own private investment firm Lupa Systems that has made media and entertainment investments.)
Starboard Value issued its letter following a report in The New York Times published on July 24 that obtained a sealed court document detailing the feud between the Murdoch family over how the trust is structured. The hedge fund contends that, rather than let a battle over political perspectives (Lachlan is seen as more conservative leaning while James recently signed a letter endorsing Kamala Harris’ presidential bid), eliminating the dual class structure would sidestep that battle as well.
In the letter, Starboard’s Smith wrote, “The four Murdoch siblings with voting rights within the Trust are reported to have widely differing worldviews, which, collectively, could be paralyzing to the strategic direction of the Company; more importantly, we are not sure why their perspectives should carry greater weight than the views of other shareholders.”
After the hedge fund weighed in with its proposal on Monday, News Corp responded and rejected the plan, defending its current model. “The Board believes that the Company’s dual-class capital structure promotes stability and has facilitated the successful implementation of News Corp’s transformational strategy and long-term outperformance for all News Corp stockholders,” the Murdoch-controlled company said.
