Rupert Murdoch began his ninth decade at his desk on Friday, with little fanfare. News Corp executives avoided the topic of his birthday “on pain of death”, two people close to the company joked.
The media mogul is now the fourth oldest chief executive in the S&P 500, but he is preparing to negotiate the terms of the biggest deal in a career that began when he inherited the Adelaide News from his father in 1953.
The bid for British Sky Broadcasting, which is edging closer to clearing regulatory hurdles in the UK but has yet to be agreed with the UK satellite operator’s board, would also be unusual in Mr Murdoch’s recent history, in having been welcomed rather than feared by investors.
News Corp’s shares still labour under a “Murdoch discount” to other media stocks, analysts say, because of the fear that its largest shareholder may at any minute spend shareholders’ capital on an unexpected deal such as MySpace or Dow Jones.
The company’s shares have fallen 24.5 per cent since May 2007, when the News Corp chairman and chief executive announced his $5.7bn bid for Dow Jones, owner of the Wall Street Journal. The Thomson Reuters index of world media stocks is down 15 per cent in the same period.
News Corp’s shares have rallied since it made its approach to BSkyB, and Mr Murdoch has bought stock recently, but its returns have fallen 22.1 per cent since 2007, whereas buy-backs from CBS, Time Warner and others have limited the sector’s decline to a 7 per cent fall.
Analysts still flinch at smaller deals. When News Corp announced in February that it would buy Shine, a television production company run by Mr Murdoch’s second daughter, Elisabeth, Michael Nathanson of Nomura said the move would “return News Corp to the penalty box”.
“We had erroneously believed that the BSkyB deal would limit the company’s ability to irritate shareholders as that deal would absorb all of News Corp’s cash balance,” Mr Nathanson added.
Yet investors said little about News Corp’s sudden return to the education market this year, with the $360m acquisition of a digital business called Wireless Generation. Analysts made no mention of Wireless Generation, Shine or Dow Jones on the company’s last earnings call. Even the Dow Jones deal – written down by $2.8bn in early 2009 – has not stopped Mr Murdoch from achieving better than average returns over each of the past three decades.
Since his 70th birthday, News Corp has averaged compound annual growth rates of 1 per cent, while the media sector slipped by 0.4 per cent a year. Those returns pale, though, compared with his seventh decade, when News Corp’s growth averaged 32 per cent, double the sector rate before the dotcom bust. Between 50 and 60, Mr Murdoch also beat his peers, with compound annual growth of 17.3 per cent, compared with the sector’s 16 per cent rate. But financial returns do not fully capture Mr Murdoch’s expansionary instincts. His decades have been marked by distinct themes: he conquered Fleet Street in the 1960s, broke into the New York newspaper scene in the 1970s, and took on Hollywood in the 1980s, Asia in the 1990s and the web in the past decade.
Each decade has changed News Corp dramatically. If he wins BSkyB, Mr Nathanson notes, it will be dominated by cable channels and satellite TV.
Mr Murdoch, now on his third marriage and facing renewed speculation about which of his six children will succeed him, seems more secure than at earlier milestones. Ten years ago, his birthday fell as DirecTV, the US satellite business he coveted, appeared to be slipping from his grasp.
It took him until 2003 to capture a stake in DirecTV, and his dream of a global satellite television operation unravelled when he had to sell it in 2006 to avoid John Malone threatening his grip on News Corp. Two decades ago, Mr Murdoch’s position was far more precarious. Months before his 60th birthday, he nearly lost the company after a small US bank refused to roll over debts exacerbated by the expense of launching BSkyB.
In March 1991, the UK-based Independent newspaper summed up Mr Murdoch’s challenges with the warning: “The British public is still not convinced that it needs satellite television. There must be doubt whether BSkyB can persuade enough of us to buy satellite dishes before its money runs out.”
BSkyB now has more than 10m subscribers. As he prepares for final talks over his biggest deal investors should remember that Mr Murdoch has derived satisfaction for decades from proving doubters wrong.
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