Rupert Murdoch is appealing the Nevada ruling that doomed his secret plan to amend a family trust, but the 93-year-old still has some options to consolidate control should he ultimately lose, according to experts in family trusts and estate planning, analysts and an investment banker.
Several avenues remain open to Murdoch: he and Lachlan could seek to buy out the voting shares of the other Murdoch children, though they’ve tried and failed to do that before.
In a more complex move, they could look to break up some of Fox and News Corp.’s assets, or a partial sale and negotiate a stake or board seat in some new entity, though such a move would likely require shareholder approval and may invite lawsuits or regulatory pushback.
Most likely, the experts told TheWrap, the Murdochs will reach a settlement while Rupert is still alive, or the children will be left to decide the companies’ future after his death.
“I would be surprised if this didn’t come to a settlement, because the family strife this has clearly provoked is not good for the stability of the companies,” Reid Weisbord, a professor at Rutgers Law School who specializes in wealth transfers and estate law, told TheWrap. “This conflict breeds uncertainty. That’s not good for the company and it’s not good for investors and how the market perceives the company. Most trust litigation ends up settling in some way.”
“So long as he’s alive and kicking, [Rupert is] in control and he can exert that control any way he sees fit,” Lloyd Greif, CEO of the Los Angeles-based investment firm Greif & Co., told TheWrap. “He’s put his back against the wall before, I expect he will do it again. I don’t know why he wouldn’t if he can’t have it be in the hands he wants it to be in. There’s all kinds of ways to try and have it end up in the desired hands.”
At stake is the family’s voting control of Fox Corp. and News Corp., whose combined market cap is more than $41 billion as of last week. Rupert fears that his younger son James, a vocal opponent of Donald Trump and supporter of liberal causes including fighting climate change, would change the editorial direction of his conservative-leaning media empire.
More broadly, the conservative titan reportedly fears a coup from his more liberal children — saying in messages it would be a “disaster” if his companies “fell into the wrong hands.” He attempted to amend the family’s irrevocable trust in a bid to give sole power to his eldest son, Lachlan, after his death. That plan, ironically dubbed “Project Family Harmony,” failed in December, when a Nevada probate commissioner ruled Rupert acted in “bad faith” toward the trust’s beneficiaries.
Fox and News Corp. declined to comment on this story, while representatives for the Murdochs did not respond to requests for comment.
The Murdoch Family Trust
The Murdoch Family Trust (MFT) was established by Rupert in 1999 following his divorce from Anna Torv as a way to ensure his children would inherit his media empire and protect against inheritance taxes. Under the trust, his four eldest children — Lachlan, Elisabeth, Prudence and James — are set to have equal voting control over Fox Corp. and News Corp. upon Rupert’s death. Murdoch’s two youngest daughters with Wendi Deng, Chloe and Grace, do not have voting rights in the trust, but are listed as beneficiaries.
Family trusts are nothing new in the media world, with families like Paramount Global’s Redstones having used them to maintain their controlling ownership stakes.
The Murdoch trust currently holds around 40% of the voting stock in Fox and News Corp., which have market capitalizations of $24.7 billion and $16.5 billion and whose stocks are up 80% and 153% in the past five years, respectively, as of the end of Friday’s trading session.
MFT is currently governed by a single trustee known as Cruden Financial Services, named after the Murdochs’ family farm in Australia. That entity is controlled by a group of managing directors appointed by the Murdochs, with a total of eight votes among them. Lachlan, Elisabeth, Prudence and James have one managing director and one vote each, while Rupert has two managing directors that each have two votes, making it so that he can never be outvoted. When Rupert dies, his four votes would disappear, leaving control of the trust up in the air.
Per the New York Times, Rupert’s proposed amendment to the trust would add two new trustees — one that Rupert would control and one that Lachlan would control — who would share power equally with Cruden. Upon Rupert’s death, Lachlan would take control of both, solidifying his majority share of the trust.
The structure of the Murdochs’ irrevocable trust makes it difficult, legally, to change, according to Naomi Cahn, a law professor at the University of Virginia and co-director of the Family Law Center. “This trust had a very narrow possibility of allowing Rupert to change the trust if he was acting in ‘good faith’ and for the sole benefit of the beneficiaries,” Cahn said.
In the judge’s ruling, he called the plan to change the trust a “carefully crafted charade” to “permanently cement Lachlan Murdoch’s executive roles” inside the empire “regardless of the impacts such control would have over the companies or the beneficiaries” of the family trust.
Buy out or sell out
Without the amendment to the trust, Rupert and Lachlan could try to buy out the other Murdoch children’s voting shares, which the pair reportedly previously tried to no avail after being unable to agree on a price. While those discussions could be restarted, experts told TheWrap that time isn’t on Rupert’s side to consolidate control under Lachlan and that there’s nothing that would compel James, Prudence and Elisabeth to do so before his death.
Another option would be a break-up, sale or merger, which would give the beneficiaries the proceeds rather than direct control of the assets. But such a move could be complicated, depending on the size and structure of such a deal.
Rupert is no stranger to these types of M&A deals. In 2013, he split off Fox and News Corp. into separate companies. He would go on to sell the entertainment assets of 21st Century Fox to Disney for $71.3 billion in 2019 while hanging on to the companies he still owns. More recently, Rupert and Lachlan proposed but later abandoned recombining Fox and News Corp. And in February, Fox added conservative podcast network Red Seat Ventures to its portfolio for an undisclosed amount.
“We continue to look at opportunities,” Lachlan told an investor conference hosted by Morgan Stanley on Monday when asked about Fox’s M&A strategy. “We will be acquisitive, but we want to make sure that we find businesses to bring into our portfolio that are going to be accretive for shareholders, that strategically make sense and we’re going to be prudent about which ones we pick.”
Similarly, News Corp. unveiled plans earlier this year to sell the Australian pay-TV company Foxtel for $2.1 billion to DAZN Group and Dow Jones agreed to acquire geopolitical and security intelligence provider Dragonfly Intelligence and geopolitical intelligence advisory services provider Oxford Analytica for $40 million. At the same investor conference, News Corp. CEO Robert Thomson said that the company would continue to look for M&A opportunities in three core areas: Dow Jones, digital real estate and books. He noted that the Foxtel deal is “not the end of us being thoughtful about simplification.”
In a December blog post, Lightshed Partners analyst Rich Greenfield said there is a “near 0% chance that Rupert wants to leave planet earth with the future of the assets he spent his life building left in limbo.” He added there’s plenty of time to execute a break-up, even if the probate process continues for the next one to two years.
Rupert could try to strike a deal that would keep Lachlan in his role as Fox CEO for a finite period of time, or negotiate an ownership stake and a board seat that could eventually be passed on to Lachlan, subject to term limits and shareholder approval, Greif said. But Enders Analysis analyst Alice Enders is skeptical that a potential buyer would want to appoint Lachlan to an executive position following a sale, arguing the outcome is very rare and that his current appointment is the “result of a patriarchal decision.”
Greenfield speculated that David Zaslav’s Warner Bros. Discovery or Comcast’s SpinCo might want to buy Fox Sports or its TV station properties, though it’s “not clear either has enough cash and we doubt Rupert wants shares in either entity,” he wrote at the time. “However, given that the majority of value rests with Fox News, maybe a hybrid cash/stock transaction for Fox Network and stations is conceivable.”
In addition to WBD or SpinCo, Greif speculated that Sony Group Corporation and Verizon Communications may be interested in acquiring some of Fox or News Corp., given their previous bids for 21st Century Fox’s film and TV assets before they were acquired by Disney.
Still, established media conglomerates may balk at the regulatory hurdles in buying Fox properties. A private equity group or wealthy individual may be easier to strike a deal with, according to Stefano Bonini, an associate professor of corporate finance at Stevens Institute of Technology. Greenfield, the Lightshed Partners analyst, echoed that possibility, saying Elon Musk buying Fox News for north of $20 billion is “not such a crazy idea.”
Enders believes that Rupert would be reluctant to pursue a sale and that it would be easier for the Murdochs to gradually unwind assets within the trust. She said the Murdochs would likely hang onto the assets within Fox Corporation, given its profits and the upside it offers to shareholders in dividends.
As for News Corp., Enders said the Wall Street Journal parent Dow Jones, the publisher Harper Collins or News UK publications The Times and Sunday Times might all be disposable, though she noted Harper Collins and the News UK assets would likely have to clear antitrust scrutiny by regulators. In the UK, she cited the public interest regulatory challenges with selling the Telegraph and said that the company’s Australian news assets would likely be easier to sell off due to the absence of multiple regulatory tests.
Leaving it up to the kids
The last option would be waiting it out until Rupert dies, leaving the fate of the family’s media empire up to current trust beneficiaries Lachlan, Elisabeth, Prudence and James — which poses its own risk. Uncertainty of the companies’ corporate governance structure could “potentially paralyze” Fox Corp. and News Corp., Weisbord, the Rutgers law professor, said.
“Their disagreements over how to exercise their governance rights may stem from intrafamily conflict and nothing to do with the merits of the business,” Weisbord said. “That’s problematic for the companies, because now you’re importing a family conflict into a business that’s trying to engage in the media world as opposed to just the Murdoch world.”
Indeed, activist investor Starboard Value LP cited the Murdoch trust battle as a reason to eliminate News Corp.’s dual class share structure last year — a proposal that was ultimately rejected at the company’s annual meeting.
Enders said it’s unlikely the children would change the editorial direction of the Murdoch empire and that they could install an executive who isn’t directly related to the family to run Fox.
“Once [Rupert] goes to the newsroom in the sky, then the siblings will have a really strong interest in working together,” she said, noting the billions they each plan to inherit in the companies’ value may matter more than their political aims. “I think they will bury the hatchet. They’ll all say, ‘Well, that was Dad’ and get on together in a much more harmonious way around their common economic interests, which are indivisible.”
