Southeastern Asset Management Inc., the investment firm that joined Carl Icahn in opposing Dell Inc.’s buyout, acquired a 12 percent voting stake in News Corp., making it the largest shareholder after Chairman Rupert Murdoch.
The 23.8 million-share Class B stake, disclosed in a regulatory filing yesterday, is valued at about $397 million, based on a closing price of $16.72. The investment accounts for about a 4.1 percent economic interest in New York-based News Corp., the publishing business split off in June from Murdoch’s film and television division.
Southeastern, led by Chairman and Chief Executive Officer O. Mason Hawkins, has no plans to influence News Corp., according to the filing. The investment company, based in Memphis, Tennessee, is known for value investing, though it has occasionally tried to sway management. Hawkins and Icahn dropped their opposition this week to Michael Dell’s $24.9 billion plan to buy out Dell.
“There is a lot of value here that may not be fully recognized by the market,” said John Janedis, an analyst at UBS AG in New York. He has a buy rating on the stock and expects it to climb to $19 within the next 12 months.
News Corp. has two classes of shares, and only Class B shareholders have voting rights. The Class B shares rose 2.9 percent to $17.20 at the close in New York, while the more widely traded Class A stock also advanced 3 percent to $17.05. Both stocks are trading at record highs.
As News Corp. “split out the U.S. Fox entertainment business, we had the opportunity to own the remaining strongly financed, premier media assets around the world at an attractive discount,” the investment firm said in its latest annual report. Murdoch spun off the publishing company at the end of June with $2.6 billion in cash and no debt.
Lee Harper, a spokeswoman for Southeastern, declined to comment, as did Ashley Huston, a spokeswoman for News Corp. The company owns the Wall Street Journal and the New York Post and competes with Bloomberg LP, owner of Bloomberg News, in financial news and data.
Southeastern, founded in 1975, is an independent advisory firm with $32.9 billion under management as of June 30, according to its website. The company, which manages Longleaf Partner Funds, generally takes large stakes in “competitively entrenched, well-managed businesses purchased at steep discounts to their intrinsic values.”
Southeastern’s biggest holdings at the end of the second quarter included Chesapeake Energy Corp., holding company Loews Corp., delivery company FedEx Corp. and satellite broadcaster DirecTV.
While Hawkins occasionally takes an activist role, doing so at News Corp. would mean going up against Murdoch, a billionaire who has built the News Corp. media empire over the past 60 years. Murdoch owns 39 percent of the Class B stock and a 14 percent economic interest in News Corp.
“Rupert has a big ownership holding in the company --there have to be easier targets out there,” Janedis said.
Murdoch, 82, split up his two media companies following a hacking scandal at its U.K. newspaper unit. News Corp. shut down the weekly News of the World and Murdoch and his son, James, who oversaw the division, testified before Parliament in 2011 about the company’s response to revelations that reporters accessed voice-mail accounts, including that of a murdered schoolgirl named Milly Dowler.
In July, Murdoch agreed to testify to Parliament a second time. British lawmakers asked for Murdoch to be recalled after the transcript of a tape was published by Exaro News, in which Murdoch told reporters at the Sun newspaper that bribery had been a routine practice.
The scandal intensified concerns among some shareholders about News Corp.’s governance. Proposals to separate the chairman and CEO titles held by Murdoch and to eliminate the dual-class stock system that allows Murdoch and his family to retain control drew opposition at News Corp.’s annual meeting last October. Investors excluding family holdings voted in support of the two measures, even as Murdoch pressed forward with a plan to split the company.
Saudi Prince Alwaleed Bin Talal is another large News Corp. investor, with 6.6 percent of the voting shares, based on data compiled by Bloomberg. He has supported Murdoch through the hacking episode.
Southeastern previously teamed up with Icahn in a shareholder revolt at Chesapeake Energy. Hawkins, 65, also joined with investors advocating for a sale of Knight-Ridder Inc. in 2005.
In dropping his battle for control of Dell, in which he was joined by Southeastern’s Hawkins in a counterbid, Icahn argued the company was worth more. Southeastern sent a letter to Dell’s board in February saying Dell “grossly undervalued” the computer maker.
While they failed to win their prize, Icahn and Southeastern took credit for obtaining a sweetened offer from Dell and Silver Lake Management LLC. The latest buyout plan now has enough votes to win approval, a person with knowledge of the matter said yesterday.
“We are pleased that our efforts contributed to the modest increase in merger consideration Dell stockholders will receive,” Southeastern said in a statement this week.