News Corp-Fox merger plan opposed by big shareholder

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By Dawn Chmielewski and Chavi Mehta

(Reuters) -A major investor in News Corp (NASDAQ:NWSA) and Fox Corp, Independent Franchise Partners, said on Wednesday it opposes Rupert Murdoch's plan to recombine the companies, raising a potential obstacle to the mogul's desire to reunite the media empire he separated nearly a decade ago.

The London-based investment firm told a special committee of News Corp's board last month that it thinks a combination on its own would fail to realize the full value of the company.

Independent, which owns about 7% of News Corp's Class A shares and 6.4% in Fox Corp, is the second investor to express dissent over the plan. The firm declined Reuters' request for comment.

News Corp investor Irenic Capital earlier this week suggested a spin-off of the media company's digital real estate business or Dow Jones as an alternative to the merger.

In October, Murdoch proposed to reunite the media companies he split in 2013, placing his publishing business in newly created public entity News Corp and the TV and entertainment businesses under 21st Century Fox.

Murdoch sold many of Fox's entertainment assets in 2019 to the Walt Disney (NYSE:DIS) Co in a $71.3 billion deal that left a smaller business focused on live news and sports.

Fox Chief Executive Lachlan Murdoch said during a 2019 investor day that he saw no logic in recombining News Corporation and Fox, arguing at the time that the split had benefits.

But Rupert Murdoch proposed just that in October, with sources saying the merger would provide greater scale to compete with media rivals.

Several people close to the Murdochs, however, viewed the effort to reunite the media companies as driven by the 91-year-old Murdoch’s succession planning to consolidate power behind his son Lachlan Murdoch, a notion the company described as "absurd" earlier this month.

Analysts have raised concerns over the merger, saying that News Corp needs to simplify by selling off or spinning off assets instead of recombining with Fox. Any deal would require the support of independent shareholders.

Speaking to Reuters on Monday, Huber Research Partners analyst Craig Huber had said that Irenic Capital's displeasure with the merger would bring more investors forward.

"Maybe this will open up the floodgates," he had said.

News Corp declined to comment on Independent Franchise's opposition, which was first reported by the Wall Street Journal. while Fox did not immediately respond to a Reuters request for comment.

Shares of News Corp rose 2% in late morning trade, while those of Fox were up marginally.