Investor Presentaiton
Investment research analysts do not see strategic merit for the recombination of Fox and News Corp (Cont'd)
we would expect a return of the historical Fox/News Corp conglomerate discount (especially in this unforgiving market)...Given the strategic rationale
for the merger is uninspiring in our view (from a Fox standpoint), an important question for investors is "Why now?"... It's true that both companies have
strong balance sheets and both are trading at healthy discounts to asset value... Still, an irony not likely to be lost on investors is that these two companies
were actually separated to create value just over 9 years ago...Complex stocks and stories have underperformed markedly this year."
CREDIT SUISSE
- Credit Suisse (16 October 2022)
"We do not see material synergy in combining both companies. Nor do we believe the larger scale will move the needle for either company. News
Corp shareholders largely own the stock because it trades at a deep discount to its sum-of-the-parts valuation which theoretically should benefit from
continued simplification of the News Corp story. Fox shareholders own an under-levered media company trading at about 4x EBITDA that is strategically
well-positioned with a news and sports focus and is not in the high-cost streaming business... To the degree the combined entity uses its larger scale for
acquisitions, that adds a layer of uncertainty in the investment...Our thesis has changed. We were looking for continued simplification of News Corp and
a growing exposure to digital real estate, a secularly high-growth business that we estimate will now represent only 10% of the combined company's
EBITDA."
LOOP CAPITAL
- Loop Capital (17 October 2022)
"At some level, the announcement is surprising since News Corp was separated from Fox in 2013 to eliminate the conglomerate discount and enable
both entities to trade close to their intrinsic valuations. Since then, of course both companies have changed quite a bit, but what hasn't changed is the fact
that both News Corp and Fox continue to trade a significant discounts to their respective peers. Therefore, a recombination in itself is unlikely to solve
this valuation problem for either company. Strategically, there is also very little business overlap between the two companies to rationalize the
announcement on synergies...While there could be some long-term benefits that could arise from reconfiguring this portfolio of these assets, there is no
obvious immediate synergies (outside of some corporate expense savings) that are likely to be available...In some ways, the recombination may also
force unfavorable comparisons to the Viacom/CBS merger forced by the Redstone family's succession struggles and to try and buy time for two
structurally challenged businesses, which in hindsight did not really help much."
BARCLAYS
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- Barclays (16 October 2022)
IRENIC
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