Jan 24 (Reuters) – Rupert Murdoch on Tuesday withdrew a proposal to reunite News Corp ( NVSA.O ) and Fox Corp as the company also explored selling Move Inc, which operates the Realtor.com website, to CoStar Group, according to a regulatory filing and sources familiar with the process.
Three sources familiar with the matter said News Corp is in talks to sell its stake in Move to CoStar for about $3 billion.
Several top shareholders have publicly said they oppose the proposed Fox-News Corp combination, and on Tuesday News Corp said in a statement that it “is not optimal for News Corp and Fox shareholders at this time.”
The deal would recombine the media empire Murdoch split nearly a decade ago.
News Corp confirmed talks to sell Move to CoStar after Reuters reported on Tuesday, adding there was no guarantee the talks would lead to a transaction.
A CoStar spokesman said the company “continually evaluates M&A opportunities across a wide range of companies to maximize shareholder value” and does not comment on “market rumors or speculation.”
No offers were exchanged between News Corp and Fox Corp before merger considerations were abandoned, according to sources familiar with the process, who said pushback from News Corp shareholders played a role in abandoning those plans.
A surge in News Corp shares in recent weeks meant Fox had to pay a significant premium to get the merger agreed, something the Murdochs did not believe they could justify to shareholders, people familiar with the matter said.
While Fox shares fell 5%, News Corp shares are up 25% since talks between the two companies were first announced on Oct. 14. News Corp currently has a market capitalization of about $11 billion, while Fox is valued at a shade over $17 billion.
Murdoch proposed reuniting his media empire last fall, arguing that together the publishing and entertainment companies he spun off in 2013 would give the combined company greater scope in news, live sports and information, the sources said.
Several people close to the Murdochs believed the attempt to combine the media companies was prompted by the legacy of the 91-year-old Murdoch, who plans to consolidate power behind his son and Fox boss Lachlan Murdoch, an idea the company described as “absurd” in November.
Some of News Corp’s major shareholders, including Independent Franchise Partners and T. Rove Price (TROV.O) rejected the idea.
Rupert Murdoch and his family control about 40% of News Corp and Fox. If a deal had been reached, they would have abstained from voting their shares when each company sought shareholder approval for the merger, due to potential conflicts of interest. Therefore, securing the support of other major shareholders has become a prerequisite for the implementation of the deal.
‘THE RIGHT DECISION’
Activist investment firm Irenic Capital, which was among the first to say the proposed merger was likely to undervalue News Corp, on Tuesday welcomed the decision not to proceed.
“This is the right decision,” said Irenic’s Chief Investment Officer Adam Katz. “Looking forward, News Corp has an opportunity to create significant value for its shareholders.”
News Corp agreed to buy Move in 2014 for $950 million to diversify its digital real estate business, which at the time was primarily in Australia.
Since then, News Corp investors have urged the company to spin off its digital assets. Irenic also publicly called on News Corp to sell its Dow Jones media assets.
In a slide presentation in November, Irenic estimated that News Corp’s 80% stake in Move was worth $1.4 billion at $2.47 a share.
In a letter to News Corp employees on Tuesday, News Corp CEO Robert Thomson said: “In my memo in October, I said the Special Committee’s assessment would have no impact on our current operations; that was indeed the case and remains so after today’s announcement”.
Reporting by Dawn Chmielevski in Los Angeles, Svea Herbst-Bailiss, Greg Roumeliotis, Anirban Sen and Helen Coster in New York; additional reporting by Deborah Sophia in Bengaluru; Editing by Bill Berkrot and Grant McCool
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