Fox Corp.-News Corp. Possible Recombination Draws Negative Investor, Analyst Reaction

The announcement by Fox Corp. and News Corp. that they are having preliminary talks to possibly re-merge have left investors and analysts unimpressed.

On Friday, both companies issued press releases they was considering such as a deal.

Guggenheim Securities believes there are some synergistic pairings for the two companies, such as Fox Corp's Fox News Media (Fox News Channel, Fox Business) group and the likes of News Corp.’s Dow Jones and its U.K. and Australia news publications.

It also adds Fox Corp’s Fox Sports and New Corp. Foxtel, an Australian pay TV company --operating in cable TV, satellite TV, and IPTV streaming services -- would also be a decent combination.

But there is much less to consider when it comes from other big pieces of News Corp: “We believe neither HarperCollins publishing nor News Corp.’s digital real estate [website] assets have an obvious corresponding partner at the Fox business.



After Dow Jones -- which is valued at $9.2 billion -- the next biggest value is its digital real estate business, with a value of $7.1 billion according to Guggenheim. HarperCollins is valued around $2.9 billion.

“We see these assets as accounting for roughly half of the intrinsic value of that standalone entity... We view digital real estate, Dow Jones, and Foxtel all as candidates that if spun-out from [News Corp] could create shareholder value.”

A re-merger move would seem to follow other media combinations taking the wrong path. “We believe that a lack of upfront strategic asset alignment detail has been detrimental to investor perception and market valuation in the combinations of CBS/Viacom and Discovery/Warner Bros,” says Guggenheim.

At the close of the stock market on Monday, Fox Corp share price was down 9.4% to $28.58, while News Corp. was up 3.4% at $16.13.
In 2013, 21st Century Fox split into two companies -- Fox Corp. and News Corp. -- with the intention to separate TV from its print media businesses.

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