Starboard says Rupert Murdoch’s News Corp should break up

Activist hedge fund Starboard Value’s CEO Jeff Smith said on Tuesday that Rupert Murdoch’s News Corp (NWSA.O) is trading at a big discount to the value of its assets and should consider spinning off some of them.

Smith’s remarks at the 13D Monitor Active Passive Investor Summit came after Reuters revealed last week that Starboard had become a News Corp shareholder, a prelude to a potential shake-up at Murdoch’s media empire.

Smith said News Corp could unlock billions of dollars in value by separating its Dow Jones news division, which publishes the Wall Street Journal, from its REA real estate division, publisher of property websites.

“We believe this valuation does not make sense,” Smith said referring to News Corp’s valuation that including debt approaches $12 billion, equivalent to 7.9 times its projected 2024 earnings before interest, taxes, depreciation and amortization.

“We believe separate news and real estate assets could help unlock $7 billion or more in value,” he added.

A News Corp spokesman said the company has maintained an active and engaged dialogue with investors. “We remain focused on executing our strategic plan, which has helped us set records in profitability over the past three years,” he said.

“We are proud of our rapid digital transformation and bright prospects for long-term growth and value creation,” the spokesperson added.

Starboard, which has pushed for changes at companies ranging from Salesforce (CRM.N) to Darden Restaurants <DRI.N,> would struggle to shake up News Corp without Murdoch’s consent. The Murdoch family trust controls 39% of the company’s voting shares.

If News Corp separates its real estate assets, shareholders would benefit, Smith said.

Starboard began building a stake in News Corp over the summer, before Murdoch, 92, announced on Sept 21 that he would step down as chairman, leaving his son Lachlan as sole chair, the sources said.

News Corp’s bets to boost digital revenue and subscriptions have yet to fully pay off, while the toll that high interest rates have taken on the real estate market has also been a drag on its digital property assets.

Sources told Reuters in January that News Corp was in talks to sell its stake in Move, operator of the Realtor.com website, to CoStar Group Inc (CSGP.O) for about $3 billion. CoStar, owner of Apartments.com, said in February the deal talks ended unsuccessfully. Reuters