The largest independent shareholder of News Corp says there is material upside for investors if the company can simplify the business by spinning off its real estate assets such as US-based Move with Australia’s REA, operator of realestate.com.au.
Michael Allison (left) and Jayson Vowles, founding partners and investors at Independent Franchise Partners. Holly Adams
The $22 billion Independent Franchise Partners, which owns sizeable holdings in both News and Fox, believes News Corp shares are worth at least $US30 and is more confident the board and management agree with its assessment.
“We continue to believe there’s a lot of opportunity in News Corp, at least $US30 a share, and the key part of realising that value is separating the real estate assets,” co-founder Jayson Vowles told The Australian Financial Review in this week’s Monday fundie profile.
News Corp’s share price closed on Friday at $US17.61.
IFP was one of several major shareholders to raise concerns about the blockbuster $40 billion proposal to merge News Corp with Fox. The proposal was recently abandoned by Rupert and Lachlan Murdoch.
The fund is among those who still believe News Corp has been significantly undervalued by the market, with the company’s prized assets such as REA and publisher Dow Jones weighed down by other legacy parts of the business.
The decision to speak out against the deal was a rare foray into public sharemarket activism.
IFP’s other co-founder, Michael Allison, said: “We’d much rather do that behind closed doors, but having said that, there have been instances such as with News Corp and Fox where we do go public.”
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Investors have questioned the company’s plan for the assets after the Murdochs abandoned the News Corp-Fox merger, then immediately announced talks were taking place with a rival to sell Move, the US-arm of the digital real estate portfolio.
Last week, News Corp announced the talks had been called off.
Mr Allison is one of several high-profile investors appearing at April’s inaugural Alpha Live conference in which hedge funds, institutions, macro investors and value investors will share their expert views on the market and investing.
Mr Vowles said: “We’ve been engaging behind the scenes for a lot longer before we actually went public with the board around a few topics, but one of them is certainly the simplification of the business, particularly their real estate assets.
“When this potential merger between Fox and news was announced, we felt that it wasn’t in the best long-term interests of shareholders to merge the business businesses as they currently stood.
“Given the time sensitive nature of this review by the special committee, we felt that we needed to put our views out and in public, which we did.”
Comments ‘no surprise’
IFP has invested about $US700 million in News Corp. A 7 per cent stake in the A shares and 6.5 per cent of the Class B shares makes it the second-largest holder behind Rupert Murdoch.
It also owns about 6.4 per cent of Fox’s A shares, which amounts to a further $US700 million.
Mr Vowles said the comments would not have come as a surprise to the News management team because they were consistent with its previous communication.
He said the fund was encouraged by the announcement relating to the sale of Move or realtor.com, although News last week revealed it had abandoned talks to sell the business to rival CoStar.
IFP said in a follow-up statement to the Financial Review: “While we thought that a combination of Move and CoStar makes strategic sense, any offer needs to recognise that realtor.com is a strategically important, valuable asset, and we understand that there are other interested parties.”
Mr Vowles said he believed there was now greater alignment between the fund and management.
“There are indications that they agree with our assessment around the opportunity to create value and that News Corp is trading at a significant discount 30 plus per cent to its sum-of-the-parts valuation.
“They recognise that simplifying the group and improving disclosure, which to be fair they have done particularly around the Dow Jones assets in recent years – that is an opportunity to create value.”
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February 27, 2023 at 01:00AM
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Independent Franchise Partners, biggest non-Murdoch shareholder in News Corp, advocates REA-Move spin-off - The Australian Financial Review
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