S&P smoothes way for News Corp move

The planned departure of News Corp from Australia is set to be smoother than expected for the local financial community following a decision by Standard & Poor?s to allow a gradual withdrawal of the media stock from market indices.

The ratings agency said on Friday that News Corp, Australia?s largest company by market capitalisation, would be removed from the Australian Stock Exchanges indices in four phases over a nine-month period and that it would give three weeks? notice before beginning the process.

At one point, the agency, which has managed the ASX?s indices since 2000, suggested the move could take place within a three- week period, a time frame it subsequently extended to six months, which local fund managers still considered too short a transition.

News accounts for about 7.5 per cent of the benchmark S&P/ASX 200, requiring many fund managers to maintain relatively large holdings of the Murdoch family?s group.

Once News moves to the US, however, the removal of this requirement could lead to up to A$29bn ($20.7bn) of selling in the Australian market, which would be disruptive both for the stock itself and more broadly for the local market.

The move could also lose business for local brokers and the ASX, if trading in the stock largely migrates to New York. At present News accounts for about 4 per cent of the Australian market?s annual turnover.

In April, Rupert Murdoch, who built News into a global media empire from his home town of Adelaide half a century ago, decided to break with the past and move the group?s domicile to the US, where he resides.

Australia?s relevance to News Corp has diminished since Mr Murdoch started the company?s international push in the late 1960s. The US accounts for about 70 per cent of group revenue, and Europe is responsible for another 22 per cent, with Australia making up the balance.

In the US, the group is set to join New York?s S&P 500 and, under S&P rules, a stock is not allowed to be part of indices in different markets. News has yet to set a date for a shareholder vote on the planned move but it is expected to hold the ballot in the second half of October when it usually holds its annual meeting in what could be the company?s last yearly gathering in Adelaide.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.