Jeff Smith’s Starboard Value has taken a “sizeable” stake in media giant News Corp in a push for divestments the activist believes would help unlock billions of dollars of trapped value.
Starboard said at the Active-Passive Investor Summit Tuesday that News Corp’s conglomerate structure is a drag on its market value, and argued the company should consider spinning off its Dow Jones news division and digital real estate arm, according to media reports.
“We believe separate news and real estate assets could help unlock $7 billion or more in value,” said Smith. News Corp is currently valued at around $12 billion equivalent to 7.9 times its projected 2024 earnings before interest, taxes, depreciation and amortization. This valuation ”does not make sense,” argued the activist.
Independent Franchise Partners and Irenic Capital management voiced similar concerns earlier this year as News Corp was pondering a merger with Rupert Murdoch’s other media company, Fox Corp. The media mogul pulled the plug on that combination after the two activists and others emerged against it.
Earlier this week, the Wall Street Journal reported that Starboard was ready to push for a separation of some of News Corp’s assets and a collapse of its dual-class share structure, which allows the Murdoch family to hold a tight grip on the company. The Murdochs have a 40% voting stake in News Corp but only hold an economic exposure of 14%.
Independent Franchise and Irenic floated similar ideas earlier this year. While London-based Independent Franchise argued News Corp’s Dow Jones unit and other assets could attract substantial bids in an open auction, Irenic suggested a spin-off of the digital real estate business or Dow Jones could help News Corp inch closer to a valuation of $34 per share.
News Corp shares were slightly up at $21.99 each as of 10:30 a.m. EDT Tuesday.