What Lachlan Murdoch told fundies in Sydney two weeks ago – The Australian Financial Review

Chanticleer
Lachlan Murdoch’s been in and around Australian business circles for most of his working life, but had little to do with the country’s big investors. Until a few weeks ago.
A couple of weeks ago, Lachlan Murdoch, 52, broke cover with Australia’s investor ranks.
Not one to normally front Australia’s fund managers on roadshows, Murdoch was the headline attraction at a small and private dinner held only a few kilometres from his home in Sydney’s inner-east.
The small crowd were all fund managers – big name stock pickers from the larger institutional equities shops in Sydney – most of who had little to do with Murdoch or his father Rupert over the years, and some of who had never met him despite him being in and out of Australian business circles his whole working life.
Lachlan Murdoch’s succession may end a tumultuous 12 months for the family’s two companies. David Rowe
Murdoch spoke off the cuff. There were no notes or powerpoint slides, no script and no minders, just an update on the family’s two businesses News Corporation and Fox Corporation, and where he wanted to take them.
Perhaps playing to the small crowd, he repeatedly stressed he was 100 per cent focused on creating shareholder value, according to those at the dinner. It was a friendly crowd; money is the name of the game in funds management, and fund managers tend to bow down to billionaires. He was valued at $3.35 billion on this year’s AFR Rich List.
He was clearly proud some of the investments he had overseen – high growth and conviction bets like News Corp’s $13 billion stake in REA Group, student loans business Credible and streaming business Tubi Corporation for example – and gave the impression of a hands-on and pretty passionate senior executive.
He travels back to US head office every second week from his home in Sydney, where his children go to school. When he’s in Sydney, he tends to work New York hours. That’s the sort of stuff that top Sydney money managers are glad they do not have to worry about.
There were no hints about what was to come and fund managers left the dinner not knowing that only a few weeks later, Murdoch would finally get the keys to his father Rupert’s News Corporation.
He was announced as News Corp’s executive chairman on Thursday night, the same role he holds at sister company Fox Corporation, while his 92-year-old father would step off the board and become chairman emeritus of both companies.
Lachlan Murdoch’s succession may end a tumultuous 12 months for the family’s two companies. This time last year, the Murdochs were planning to reunite their News Corp and Fox businesses, calling it the next logical step of the strategy that led the media billionaires to sell entertainment giant 21st Century Fox to Disney in 2017 for $US52 billion.
It was about bringing together live sport and news, two things that consumers want immediately and are arguably less discretionary than TV entertainment and movies – but the deal was off a few months later called “not optimal for shareholders of News Corp and Fox at this time”.
In reality, it also faced considerable backlash from investors including Sydney-based Airlie Funds Management, who didn’t want to see News Corp combined with Fox. News Corp owns the company’s stake in REA and Move in the United States, Foxtel in Australia, Dow Jones and HarperCollins, among other businesses, and trades at a significant discount to its asset backing.
Soon after, it also abandoned talks to sell its US digital real estate business Move for about $US3 billion ($4.4 billion).
Murdoch’s comments from the dinner were ringing through those fund managers’ heads on Friday, as they tried to work out what it meant for the future of the family’s media empire.
It was a timely introduction to a man who’s well known in media circles – there are plenty of former News Corp executives who’ll give their two cents worth and recount fronting him when they hadn’t made budget or wanted money for something – but less in local markets.
Those close to him say he’s been fronting investors in the US for a while, just not Australia. Fox Corp isn’t listed in Australia, while News’ ASX-listing is small.
One thing that stuck in the Australian fund managers’ heads were Murdoch’s remarks about M&A.
He said large media sector deals were hard to get past the antitrust regulator in the United States – which is similar to deals in every concentrated sector (banking, energy, tollroads) in Australia.
So, investors are thinking there is unlikely to be any giant strategic pivot in the near to medium term, at least, although are fully aware that deals (big and small) have been a big part of the family business under Rupert Murdoch and Lachlan has been at the table for plenty of them.
“Evolution not revolution” is how his backers were putting it on Friday, pointing out that he’s done a long apprenticeship under his father at News Corp and has been Fox executive chairman since 2105 (it was 21st Century Fox before a $US50 billion sale of its film production business to Disney) . It is still all about news, sport and digital, and looking forwards not backwards.
The ASX-listed shares were up 1.9 per cent to $32.25 in Friday afternoon trade.
Murdoch junior’s most notable was paying about $10 million for a 44 per cent stake in realestate.com.au (later REA Group), following a direct approach from Sydney real estate agent and company director John McGrath, while others for the company include Credible, where loans are up three-times since News Corp’s acquisition, Tubi, which has tripled subscribers.
Of course, it has not been all winners. He’s still remembered for One.Tel, a telecommunications company that collapsed in 2001, and Channel Ten owner Ten Network Holdings, which went into administration in 2017. News Corp’s betting play is also in trouble.
One of his loudest supporters in Australian markets is Sydney stockbroker Angus Aitken, who is known for backing family-led businesses and was quick to tell clients that News Corp was in good hands.
“Lachlan Murdoch has the same entrepreneurial genes as his Dad and has zero to prove, he already has proved himself in spades,” he said in a 1400 word note to fund managers that hit inboxes as the sun rose over Sydney Harbour.
“Anyone who has heard Lachlan talk about these businesses knows he knows these businesses inside out and knows how to allocate capital and back people within these firms with that capital for the long term.”
He said Rupert Murdoch had turned a three-paper tiddler into $US100 billion of assets, if you add the market capitalisations of News and Fox (about $US30 billion) and some of the big asset sales (c$US70 billion). “It is hard to think of anyone who will replicate that in life.”
Lachlan Murdoch will likely struggle to create anywhere near that much value, but he also doesn’t have to. Investors will be happy enough if he can close the discount between New Corp’s share price and asset value – which funds like Melbourne’s L1 Capital have talked about for years. That discount was so glaring that stockbroker UBS for a while was putting out a regulator News Corp note, pointing out the difference between the sum of its parts and share price.
The bigger news on Friday was the end of the Rupert Murdoch-era, after a career stretching seven decades. Lachlan’s ascension to the top of both companies was telegraphed by his father in the past few years. Second son James moved to the fringes of the family business after the Fox/Disney deal in 2019.
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