ValueAct Capital Management LLC, the activist hedge fund run by Jeffrey Ubben, acquired a new $1 billion stake in 21st Century Fox Inc. and has held talks with management, a person with knowledge of the matter said.
ValueAct bought about 30 million shares, mostly the Class B voting stock, after news leaked of Fox’s bid for Time Warner Inc. on July 16, depressing the price. The fund managers held discussions with Fox executives including James Murdoch and Chase Carey, and were mostly already in agreement, said the person, who asked not to be identified because the investment isn’t public. Fox, the film and TV company, last week withdrew its $85 a share offer for Time Warner and announced a $6 billion stock buyback authorization.
Fox Chairman and Chief Executive Officer Rupert Murdoch called the Time Warner decision “resolute” and said Fox is a “strategically complete company” that doesn’t need to hunt for acquisitions, during an Aug. 6 conference call after the company released earnings. ValueAct intends to be a long-term investor in Fox and agrees with the company’s discipline in dropping this bid for Time Warner, the person said.
With the share repurchase, Fox’s earnings per share will climb to about $2.50, the person said. The Murdoch family controls 39 percent of the voting power at Fox.
Dan Berger, a spokesman for New York-based Fox, declined to comment. CNBC reported ValueAct’s investment earlier today.
Fox Class A non-voting shares rose 1.2 percent to $34.77 at the close in New York, while the Class B shares climbed less than 1 percent to $33.68. The combined market value is $76.5 billion.
Fox will have about $10 billion in cash at the end of fiscal 2015, making “acquisition addiction” a remaining risk for investors, even with the Time Warner deal off the table, Doug Creutz, a San Francisco-based analyst at Cowen & Co., wrote in a note dated Aug. 7. That amount factors in the buyback, Cruetz wrote.
San Francisco-based ValueAct, which manages about $14 billion, helped change the direction of companies from Microsoft Corp. and Valeant Pharmaceuticals International Inc. to Sara Lee Corp. Last year, the firm helped get industrial equipment maker Gardner Denver Inc. to sell itself to KKR & Co. In 2012, it attained board seats with Adobe Systems Inc. and Motorola Solutions Inc.