Activist firm Starboard Value Pushes for Spin-off of News Corp’s Real Estate Assets

         

Summary: Starboard Value is urging News Corp. to separate its real estate business from the rest of the company in a bid to create more value. The CEO of Starboard, Jeffrey Smith, believes that spinning off the real estate assets, including an interest in REA Group, would highlight the business and boost its worth. News Corp. owns the Dow Jones news business, which encompasses publications like The Wall Street Journal. Smith also criticized the valuation discrepancies between the news and real estate divisions of News Corp.

Activist investment firm Starboard Value is putting pressure on News Corp. to spin off its real estate business from the rest of the company. Starboard CEO Jeffrey Smith revealed that the firm has been discussing the matter with News Corp. He believes that separating the real estate assets, such as its interest in REA Group, will showcase the business’s value. News Corp., which includes the Dow Jones news business, has responded by stating its commitment to driving shareholder value and focusing on its strategic plan for long-term growth and value creation.

Starboard’s stake in News Corp. was previously reported by Reuters and The Wall Street Journal, although the exact size of the stake remains unknown. However, any change may be difficult due to the Murdoch family trust controlling about 40% of the voting rights for both News Corp. and Fox Corp. Smith also criticized the dual-class governance structure, suggesting that there are easier paths to create significant value.

Smith highlighted the valuation discrepancies between News Corp.’s news and real estate divisions. He noted that the news division trades at a four-times earnings multiple, while competitor New York Times trades at 15-times. On the other hand, News Corp.’s real estate assets trade at eight-times. Smith claims that the stock price is undervalued and that the split of the businesses has not occurred due to insecurity about leaving the news division alone for a period of time.

Starboard’s push comes following the announcement that Rupert Murdoch, the chairman of the board at both News Corp. and Fox Corp., will step down and become chairman emeritus, with Lachlan Murdoch becoming sole chairman. Starboard’s call for change at the company also follows the failed merger between News Corp. and Fox Corp. in January. Smith stated that discussions regarding another merger have not taken place.

Tags: Starboard Value, activist investment, News Corp., real estate assets, Dow Jones, valuation discrepancies, Rupert Murdoch, Lachlan Murdoch, merger, shareholder value

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