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What Rupert Murdoch's engagement to Jerry Hall means for shareholders
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Rupert Murdoch and Jerry Hall announced their engagement last week. Does this confuse the already-complicated family entitlements? Getty Images
by Trevor Sykes
Rupert Murdoch's engagement to Jerry Hall is inspirational for us old guys.
It shows that even at the age of 84 we can still pull a top chick, although it probably enhances your charm to have a few billion dollars.
Whether the romance of Jerry and Rupert spreads to shares in his companies is a different question.
Following the split of the empire in 2012, News Corporation (NWS) comprises newspapers and information services in Australia, the US and UK, book publishing, and associated digital businesses such as the Australian-based multinational media group REA, which specialises in real estate.
News is battling through a tough time at present. In the year to June, News' revenues crept slightly higher, but the bottom line slipped from a $US239 million profit to a $US147 million ($210 million) loss, representing US26¢ a share.
The numbers were a little worse in the September quarter, with revenues sliding 4.5 per cent on the previous corresponding period. NPAT jumped from $US65 million to $US175 million for the quarter, but that was mainly attributable to a one-off tax benefit of $US151 million following the sale of its loss-making digital education business.
The big picture is that advertising remained challenging especially in the UK, but the company's Australian results, which are reported in $US, suffered from the weaker $A.
News is in the middle of a huge expansion of the digital side of its business, trying to build long-term value and tap fresh sources of revenue. At the same time, News is clamping down on costs.
NWS
NEWS CORP B VOTING (NWS)
$18.28-0.28-1.51%
volume 225108value 4127303.9
May14GMT+1000 (AUS Eastern Standard Time)Jun13Jan16182016.37721.312
Last updated: Wed Jan 20 2016 - 15:42:36
VIEW FULL QUOTE
Hopefully, this journey will result in better returns for shareholders, but they are not yet apparent. Last year's loss means the stock doesn't have a price/earnings multiple, and as it probably won't pay a dividend this year, it doesn't have a yield either.
Ord Minnett is tipping earnings of 88¢ in 2017 and a dividend of 29c¢ At a share price around $18.70 that's a yield of 1.6 per cent next financial year – if all goes well.
News has always been skinflint with dividends, because even when he was a boy brigand on the Adelaide News, Murdoch had to retain cash within the business to help fund his expansions.
Because those expansions were profitable, News always enjoyed a high p/e multiple because it was a growth stock. But henceforth any growth will be in the digital business rather than traditional newspapers.
LIFE AFTER MURDOCH
Meanwhile it's worth pondering what News might look like after Rupert.
The Murdoch family holding in News is housed in a series of trusts. The trustee company administering them has eight directors, four of whom represent Rupert's interests and the other four represent his four adult children: Prudence (from his first wife, Patricia), Lachlan, James and Elisabeth (from his second wife, Anna).
Upon Rupert's death, the first four directors are supposed to resign and the remaining four will run the trust for his children.
This arrangement had to be altered upon the birth of Chloe and Grace Murdoch during Rupert's marriage to Wendi Deng.
The alteration reportedly caused huge friction within the family, with the first four children fearing that one-third of the voting rights may be exercised by Wendi.
The original trusts defined "adult" as those children who turned 30 – an ironic definition considering that by the time he turned 30, Rupert was a fully fledged media entrepreneur.
But if that definition still applies, the Deng children will not both become adults until 2033, during which time their interests may well be looked after by Wendi.
The ultimate nightmare after Rupert's death would be for some disaffected claimant to hire a hungry lawyer ("I think I'm due a billion dollars and you can have half if you get it") and tie up the family stake in News for years.
Miss Hall has four children of her own, and at the age of 59 is unlikely to add further to Rupert's heirs. As she also has her own money (Thanks, Mick Jagger) she may not need to be part of the trusts.
She reportedly once said: "I prefer older men. I look better next to them". Gotta love the girl.
Trevor Sykes is not a licensed investment adviser. Views expressed are those of the author and not a substitute for tailored investment advice.
Read more: What Rupert's engagement means for shareholders
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