Rupert Murdoch, who began building his media empire 60 years ago, is relishing the chance “to do it all over again” with his newly streamlined publishing company that has $2.6 billion in cash to fuel acquisitions.
The new News Corp. (NWSA), the owner of the Wall Street Journal and Dow Jones that split from the entertainment division last week, has more cash at its disposal than any other publisher, according to data compiled by Bloomberg. When Murdoch was asked what he plans to do with the cash hoard, the 82-year-old billionaire told investors that there are “a lot of opportunities out there.”
The new company officially began trading today. Murdoch may seek to purchase Tribune Co. (TRBAA)’s Los Angeles Times to bolster News Corp.’s ambitions as a global news service by adding extensive entertainment coverage, said Ken Doctor, a media analyst with Outsell Inc. With the newspaper industry shrinking, News Corp. may look for deals in digital education, or consider buying Zillow Inc. (Z) or Trulia Inc. (TRLA) to expand in online real estate listings, said Gabelli & Co.
“They will be acquisitive -- that’s the way they operate,” Karen Klapper, a debt analyst at CreditSights Inc. in New York, said in a phone interview. “That’s the only way it grows. Publishing is only going one way these days, and it’s not up.”
Steven Rubenstein, a spokesman with Rubenstein Associates Inc. representing News Corp., declined to comment.
Today, News Corp.’s new shares fell 3 percent to $14.79.
The new company, which is the largest U.S. newspaper publisher with a market value of about $8.6 billion, is pursuing growth in a declining industry. Advertisers and readers continue to flock to digital venues where ad rates are cheaper and the content is largely free.
Sales may drop 4 percent in the next 12 months, while News Corp.’s former entertainment business -- now called 21st Century Fox -- is expected to gain 9.9 percent, according to estimates from Richard Greenfield, an analyst at BTIG LLC.
“They could survive without making a deal and suffer some declines or maybe eke out some growth,” Dave Novosel, a Chicago-based debt analyst at Gimme Credit LLC, said in a phone interview. “But I don’t know if they can survive in the long term doing that.”
News Corp.’s balance sheet will allow it to pursue acquisitions of about $1 billion to grow its news business, he said. The company already owns the New York Post and the Times and Sun newspapers in the U.K.
Murdoch has been seeking ways to acquire the Los Angeles Times, owned by Tribune, people familiar with the matter told Bloomberg News in March. Tribune, which emerged from bankruptcy at the end of 2012, said in February it hired JPMorgan Chase & Co. and Evercore Partners Inc. as financial advisers after receiving unsolicited interest in its newspapers, which also include the Chicago Tribune and the Baltimore Sun.
If Tribune were to sell the Los Angeles Times as a separate entity, bids could go as high as $300 million, according to Doctor of Burlingame, California-based Outsell.
Gary Weitman, a spokesman for Chicago-based Tribune, declined to comment.
Tribune said today that it agreed to buy Local TV Holdings LLC’s 19 television stations for $2.73 billion in cash, the biggest U.S. broadcasting deal in six years, in a move that reduces its reliance on newspapers.
Last year, Murdoch’s executives looked into acquiring about a fifth of Time Inc. (TWX)’s magazine titles, according to two people with knowledge of the matter who asked not to be named because they weren’t authorized to speak publicly. Murdoch’s appetite for acquisitions has not diminished, one of the people said.
News Corp. may focus takeovers on the same industry as its REA Group Ltd. (REA), an online real estate listings service in Australia that analysts estimate will increase sales 16 percent in the year ending June 2014.
Murdoch could try to expand REA’s services into the U.S. or buy a competing business, such as Zillow or Trulia, according to Barry Lucas, a media analyst at Gabelli in Rye, New York. Gabelli’s parent company Gamco Investors Inc. oversees about $40 billion and owns News Corp. shares. Zillow, based in Seattle, has a market value of $1.9 billion, compared with San Francisco-based Trulia at about $1 billion.
Katie Curnutte, a spokeswoman for Zillow, and Ken Shuman, a spokesman for Trulia, said the companies don’t comment on speculation.
News Corp., which is starting out with $2.6 billion in cash and no debt, has earmarked $500 million for stock buybacks. Even at $2.1 billion, News Corp. would have 21 percent more cash than the next-largest holder in the publishing industry, Financial Times owner Pearson Plc (PSON), which also has about $3.7 billion in debt, according to data compiled by Bloomberg.
“It feels a hell of a lot better starting out with $3 billion in liquidity than with nothing as we did in Adelaide,” Murdoch told investors last month.
Not all of Murdoch’s deals have been a success. After MySpace was sold for a fraction of what News Corp. paid, Murdoch said the social network had been mismanaged “in every possible way.”
It may be more prudent for News Corp. to invest internally to build out the education business and better transition newspapers online, BTIG’s Greenfield, who is based in New York, said in a phone interview.
“There’s far too many missed opportunities internally to be making large acquisitions externally,” said Greenfield, who didn’t rule out smaller deals.
News Corp. may look for takeovers that would give its money-losing education division a new technology platform or distribution method for its products, said Gabelli’s Lucas. News Corp. started Amplify to digitize education through analytics software, educational games and a new $299 tablet.
News Corp.’s Dow Jones division may also look for deals as it aims to replicate some of the data services sold by companies like Thomson Reuters Corp. and Bloomberg LP, said Tim Nollen, an analyst with Macquarie Group Ltd. in New York.
While the company can build many of those services, Nollen said, “there’s some company out there that you and I have never heard of that would help them get there faster.”
News Corp. competes with units of Bloomberg LP, owner of Bloomberg News, in selling financial news and information.
Murdoch is “not afraid to take chances,” Gabelli’s Lucas said. “What I don’t expect from any company run by Rupert Murdoch is for them to sit on their hands.”