Believes News Corp Suffers from
Worst-In-Class Corporate Governance That Has Exacerbated the
Company’s Valuation Discount
Contends There Are No Reasonable Arguments
to Extend Super-Voting Rights and De Facto Control to the
Inheritors of a Founder
Plans to File a Proxy Statement with
Additional Details and Looks Forward to Continued Engagement with
Shareholders
Starboard Value LP (together with its affiliates, “Starboard” or
“we”), a significant shareholder of News Corporation (Nasdaq: NWSA,
NWS) (“News Corp” or the “Company”), today released the below
letter sent to News Corp shareholders. A copy of the letter can be
reviewed below or downloaded at:
https://www.starboardvalue.com/presentations.
***
September 9, 2024
Dear Fellow Shareholders,
Starboard Value LP (together with its affiliates, “Starboard” or
“we”) is a large shareholder of News Corporation (“News Corp” or
the “Company”). We have great respect for News Corp and the
evolution of the business since its formation in 2013. News Corp
has transformed itself from a business comprised primarily of
newspaper assets in decline to a growing, digital-first,
highly-recurring, subscription-oriented business. As we outlined
last year at the 13D Monitor Active-Passive Investor Summit, we
believe News Corp has an opportunity for significant shareholder
value creation. Since that time, we have enjoyed discussions with
our fellow shareholders, who share our concerns that the Company is
significantly undervalued and is burdened by its dual-class share
structure that provides outsized influence to the Murdoch
family.
To be clear, we believe dual-class share structures are
NOT in the best interests of
shareholders and are NOT reflective of
best-in-class corporate governance practices. That being said, we
can understand that there are limited and unique circumstances
where some may consider the structure to be beneficial.
Theoretically, some may believe dual-class share structures could
provide potential benefits to recently listed companies that,
perhaps, want their visionary founder to be insulated against
short-term pressures for a limited period of time. However, News
Corp could not be further from this archetype.
News Corp and its predecessor and related companies have had
dual-class share structures in place for decades under the
leadership of founder Rupert Murdoch. However, at last year’s
annual meeting, Rupert Murdoch transitioned to Chairman Emeritus
and his son, Lachlan Murdoch, became the sole Chair of News Corp.
As noted above, while we can understand how some could see a
benefit to a visionary founder retaining outsized control for a
limited duration of time, that potential understanding vanishes as
super-voting power and the associated protections transition to
others.
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. For background, the
Murdoch family’s ownership in News Corp is managed by the Murdoch
Family Trust (the “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. 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.
While the legal proceedings are not public, press reports
include excerpts of legal documents that point to Rupert Murdoch
seeking to have his family influence the strategic direction of
both companies in perpetuity, viewing them both as family
businesses:
“According to the court’s decision, Mr.
[Rupert] Murdoch was concerned that the “lack of consensus” among
his children “would impact the strategic direction at both
companies including a potential reorientation of editorial policy
and content.” It states that his intention
was to “consolidate decision-making power in Lachlan’s hands and
give him permanent, exclusive control” over the
company.”
– The New York Times, July 24,
2024
“The family battle has been years in the
making. Murdoch has always sought to keep
his media enterprise in the family’s hands, and he
brought several of his children into the business over the
years.”
– The Wall Street Journal, July 24, 2024
There are no reasonable arguments to extend super-voting rights
and de facto control to the inheritors of a founder. The situation
at News Corp is a textbook example of one of the worst forms of a
dual-class share structure – one that extends beyond any reasonable
timeline and one in which super-voting rights are moving from a
visionary founder to the founder’s children. 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. This is
clearly not the appropriate governance structure for a public
company, and we believe it has exacerbated News Corp’s valuation
discount relative to its inherent value.
To address these concerns, we have submitted a non-binding
business proposal to be voted upon at News Corp’s upcoming 2024
Annual Meeting of Shareholders (the “2024 Annual Meeting”) that
calls upon the Board of Directors (the “Board”) to take all
necessary actions to collapse the Company's dual-class share
structure. We have submitted this proposal to give shareholders the
opportunity to stand up for their rights and to communicate to the
Board that the time for News Corp’s dual-class share structure has
long passed.
While News Corp is often described as a controlled company and
shareholders often feel bound to the desires of the Company’s
founding family, the Murdoch family’s economic ownership stake in
News Corp is approximately 14%1, and even when accounting for the
unequal voting rights of the Company’s share classes, the Murdoch
family controls 41%1 of the vote.
Shareholders do have a choice and will have an opportunity to
make their voices heard – there is a path to achieve majority
support for this proposal. We believe majority support for this
proposal will send a clear and direct message to the Board to
eliminate the dual-class share structure. If the Board refuses to
listen, we can then take further action.
Previous proposals to eliminate the dual-class structure were
soundly supported by shareholders unaffiliated with the Murdoch
family. In fact, nearly 90%2 of unaffiliated shareholders supported
a previously submitted proposal, resulting in 49.5%2 of total votes
being in favor of eliminating the dual-class share structure.
Despite this clear message from unaffiliated shareholders, the
Board failed to take action. The situation has become even more
important in light of recent reporting on Murdoch family dynamics.
We hope shareholders will once again clearly express their views,
but we hope that this time, the Board will finally realize its
obligation to represent the best interests of all shareholders.
Shareholders deserve better.
We will be filing a proxy statement in the coming weeks with
more details on the proposal. We look forward to continuing to
engage with our fellow shareholders.
Sincerely,
Jeffrey C. Smith Managing Member Starboard Value
***
About Starboard Value LP
Starboard Value LP is an investment adviser with a focused and
differentiated fundamental approach to investing in publicly traded
companies. Starboard invests in deeply undervalued companies and
actively engages with management teams and boards of directors to
identify and execute on opportunities to unlock value for the
benefit of all shareholders.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Starboard Value LP, together with the other participants named
herein (collectively, "Starboard"), intends to file a preliminary
proxy statement and accompanying proxy card with the Securities and
Exchange Commission ("SEC") to be used to solicit votes for the
approval of a business proposal at the 2024 annual meeting of
stockholders of News Corporation, a Delaware corporation (the
"Company").
STARBOARD STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO
READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH
PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEB
SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS
PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT
WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES
SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR.
The participants in the proxy solicitation are anticipated to be
Starboard Value and Opportunity Master Fund Ltd (“Starboard V&O
Fund”), Starboard Value and Opportunity S LLC (“Starboard S LLC”),
Starboard Value and Opportunity C LP (“Starboard C LP”), Starboard
P Fund LP (“Starboard P LP”), Starboard Value P GP LLC (“Starboard
P GP”), Starboard Value R LP (“Starboard R LP”), Starboard Value
and Opportunity Master Fund L LP (“Starboard L Master”), Starboard
Value L LP (“Starboard L GP”), Starboard Value R GP LLC (“Starboard
R GP”), Starboard G Fund, L.P. (“Starboard G LP”), Starboard Value
G GP, LLC (“Starboard G GP”), Starboard Value A LP (“Starboard A
LP”), Starboard Value A GP LLC (“Starboard A GP”), Starboard X
Master Fund Ltd (“Starboard X Master”), Starboard Value LP,
Starboard Value GP LLC (“Starboard Value GP”), Starboard Principal
Co LP (“Principal Co”), Starboard Principal Co GP LLC (“Principal
GP”), Jeffrey C. Smith and Peter A. Feld. As of the close of
business on September 6, 2024, Starboard V&O Fund beneficially
owned directly 3,982,090 shares of Class A Common Stock, par value
$0.01 per share (the “Class A Common Stock”) and 5,029,605 shares
of Class B Common Stock, par value $0.01 per share (the “Class B
Common Stock”). As of the close of business on September 6, 2024,
Starboard S LLC directly owned 517,744 shares of Class A Common
Stock and 610,586 shares of Class B Common Stock. As of the close
of business on September 6, 2024, Starboard C LP directly owned
402,457 shares of Class A Common Stock and 472,065 shares of Class
B Common Stock. As of the close of business on September 6, 2024,
Starboard P LP directly owned 3,577,549 shares of Class A Common
Stock, consisting of 3,577,549 shares of Class A Common Stock
underlying certain forward purchase contracts exercisable within 60
days of the date hereof. Starboard P GP, as the general partner of
Starboard P LP may be deemed the beneficial owner of an aggregate
of 3,577,549 shares of Class A Common Stock owned by Starboard P
LP. Starboard R LP, as the general partner of Starboard C LP and
the managing member of Starboard P GP, may be deemed the beneficial
owner of the 402,457 shares of Class A Common Stock owned by
Starboard C LP and 3,577,549 shares of Class A Common Stock
beneficially owned by Starboard P LP, and 472,065 shares of Class B
Common Stock owned by Starboard C LP. As of the close of business
on September 6, 2024, Starboard L Master directly owned 224,349
shares of Class A Common Stock and 259,890 shares of Class B Common
Stock. Starboard L GP, as the general partner of Starboard L
Master, may be deemed the beneficial owner of the 224,349 shares of
Class A Common Stock and 259,890 shares of Class B Common Stock
owned by Starboard L Master. Starboard R GP, as the general
partner of Starboard R LP and Starboard L GP, may be deemed the
beneficial owner of the 402,457 shares of Class A Common Stock
owned by Starboard C LP, 3,577,549 shares of Class A Common Stock
beneficially owned by Starboard P LP, and 224,349 shares of Class A
Common Stock owned by Starboard L Master, and 472,065 shares of
Class B Common Stock owned by Starboard C LP and 259,890 shares of
Class B Common Stock owned by Starboard L Master. As of the close
of business on September 6, 2024, Starboard G LP directly owned
3,200,058 shares of Class A Common Stock beneficially owned
directly, consisting of 3,200,058 shares of Class A Common Stock
underlying certain forward purchase contracts exercisable within 60
days of the date hereof. Starboard G GP, as the general partner of
Starboard G LP, may be deemed the beneficial owner of the 3,200,058
shares of Class A Common Stock owned by Starboard G LP. Starboard A
LP, as the managing member of Starboard G GP, may be deemed the
beneficial owner of the 3,200,058 shares of Class A Common Stock
owned by Starboard G LP. Starboard A GP, as the general partner of
Starboard A LP, may be deemed the beneficial owner of the 3,200,058
shares of Class A Common Stock owned by Starboard G LP. As of the
close of business on September 6, 2024, Starboard X Master directly
owned 1,305,223 shares of Class A Common Stock and 1,468,894 shares
of Class B Common Stock. As of the close of business on
September 6, 2024, 769,530 shares of Class A Common Stock and
890,960 shares of Class B Common Stock were held in an account
managed by Starboard Value LP (the “Starboard Value LP Account”).
Starboard Value LP, as the investment manager of each of Starboard
V&O Fund, Starboard C LP, Starboard P LP, Starboard L Master,
Starboard X Master, Starboard G LP and the Starboard Value LP
Account and the manager of Starboard S LLC, may be deemed the
beneficial owner of an aggregate of 13,979,000 shares of Class A
Common Stock and 8,732,000 shares of Class B Common Stock directly
owned by Starboard V&O Fund, Starboard S LLC, Starboard C LP,
Starboard P LP, Starboard L Master, Starboard X Master, Starboard G
LP and held in the Starboard Value LP Account. Each of Starboard
Value GP, as the general partner of Starboard Value LP, Principal
Co, as a member of Starboard Value GP, Principal GP, as the general
partner of Principal Co, and Messrs. Smith and Feld, as members of
Principal GP and as members of each of the Management Committee of
Starboard Value GP and the Management Committee of Principal GP,
may be deemed the beneficial owner of 13,979,000 shares of Class A
Common Stock and 8,732,000 shares of Class B Common Stock directly
owned by Starboard V&O Fund, Starboard S LLC, Starboard C LP,
Starboard P LP, Starboard L Master, Starboard X Master, Starboard G
LP and held in the Starboard Value LP Account.
1 Source: Company filings. Note: The Murdoch family’s economic
ownership and voting rights are based on the shares held by the
Murdoch Family Trust and the K. Rupert Murdoch 2004 Revocable Trust
as of the 2023 proxy statement. 2 Source: Company filings.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240909244109/en/
Investor Contacts: Peter Feld, (212) 201-4878 Gavin Molinelli,
(212) 201-4828 www.starboardvalue.com
Media Contacts: Longacre Square Partners Greg Marose / Charlotte
Kiaie, (646) 386-0091 starboard@longacresquare.com
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