Rupert Murdoch’s News Corporation has made the very big
announcement that they are moving their registered head office from
Adelaide to Delaware and changing their primary listing to the New York
Stock Exchange. Usually Crikey’s in-depth coverage is reserved
for our paying subscribers but here are five different sealed section
angles we sent to our subscribers this week.


News soars on Wall Street plan

Rupert Murdoch has this morning been vindicated in his plan to
take News Corp to America after the company’s preferred non-voting
stock soared 77c to $11.68 and the ordinary stock gained a more modest
17c to $12.33.

After the Hughes Electronics deal, News Corp had 3.855 billion
preferred shares on issue so they have soared in value by a massive $3
billion this morning alone whilst the ordinary shareholders are only
$356 million in front.

This values the overall company at $70.6 billion with the preferred
shares now at a record high of $45 billion or 63.7 per cent of the
economic value. It is a amazing to think that they don’t normally get a
vote although they will on the US move.

Given that Australian shareholdings are concentrated in the ordinary
stock, there has already been a substantial transfer in wealth to the
Americans although everyone is still in front.

Overnight on the New York Stock Exchange, the preferred shares were
up $US2.41 or 6.5 per cent to $US35.03, while the voting stock was 55c
to $US37.43. The American ADRs are worth four of their
Australian-listed equivalents.

And Fox Entertainment Group – News Corp’s seperately listed American
entertainment business – was down 27c or almost 1 per cent to $US28.40.
The New York Times is reporting that analysts believe Fox Entertainment
won’t trade independently for long after the move – “Now that News
Corporation is going to be a US-listed company, the whole basis for Fox
to be listed is going away.”

Read it here. This is a very strong point. US investors can already buy direct
exposure to the American operations through a US-registered and
operated business.

News Corp has now made 5 separate releases to the ASX on this deal which you can read here.

A right royal send off for Rupert

By Hillary Bray

OK subscribers, consider yourselves lucky. Next year, we’ll be asking
you for money to send the editor to New York for the News Corp AGM.
This year, however, we’re only asking for ideas.

This year’s News Corp AGM seems set to be the last in l’il ol’
Adelaide, the cradle of the empire. All children have to leave home
sometime, but it’s got us feeling quite sentimental.

We reckon Rupert will need a real send off. A dinkum Aussie send
off. A send off that he’ll remember for a long, long time. What should
we do? How should Crikey mark this event? Such an occasion will need
careful consideration and careful planning. Your suggestions, please,
to [email protected].

Should we run for the board in a repeat of the 2002 effort? Is it
time for Crikey to wrap itself in the flag and launch the “Keep News in
Australia” campaign?

And should Crikey also start a food pack for Rupert so he doesn’t
feel alone and left out of all things Australian? We should send him
Vegemite, pavlovas, peach melba and the like each year.

We certainly hope that Crikey’s annoying questions at the last five
News Corp AGMs hasn’t contributed to the departure. Afterall, Rupert
was asked just one question in seven years during the 1990s until
Crikey turned up in 1999 and asked 16 questions over 40 minutes as you
can see from this story on PM at the time: http://www.abc.net.au/pm/s64071.htm

We do suspect that Rupert’s embarrassing rejection by Australian
institutions over lucrative executive options at last year’s AGM was
the final straw that broke the camel’s back. He even admits that they
started looking at this only six months which perfectly coincides with
the first rebuff in the company’s history by Australian shareholders.

We can just imagine the conversation after the meeting when Rupert
explained that American institutions supported the options scheme but
Australian institutions opposed it: “Stuff ’em, if that’s the way they
feel we’ll relocate to America where there isn’t this crazy envy-driven
obsession with executive pay.”

Naturally Rupert can’t say any of this because these very same
Australian institutions would vote down his plan and he needs support
from 75 per cent of non-Murdoch shares and 50 per cent of shareholders
in one of those rare deals where the small shareholder has just as much
voting power as the big institutions.

3. How the Australian media covered Rupert’s bombshell

Not surprisingly, the News Limited press have trumpeted
Rupert’s move as a great day for the company, shareholders and “all
Australian”.

The Australian had the only picture of Rupert and Lachlan looking
very pleased with themselves on the front page along with some positive
spin from veteran Murdoch loyalist, Bryan Frith, under the headline
“Switch all good for investors”

Read all of Frithy’s wisdom here.

And Terry McCrann was gushing in his praise for the decision; “It’s a
great and exciting day for Rupert Murdoch and all the family – the
culmination of one 50-year journey and the start of another. It’s a
huge day for all shareholders in The News Corporation. It’s also an
important day for Australia, for all Australians, securing one of our
two key links to the dynamic growth industries of the 21st century.”

Thankfully, the Fairfax commentators were more neutral in their
coverage. Alan Kohler focuses on the importance of joining influential
indexes in attracting institutional investors: http://www.theage.com.au/articles/2004/04/06/1081222466765.html

Elizabeth Knight writes that Rupert will still need to “satisfy a large
number of Australian shareholders that this a good deal – and this
might not be so easy” – http://smh.com.au/business/index.html?from=lhsnav

Rupert gave some time to the opposition – The Fin Review’s Trevor Sykes
and the ABC – but he wasn’t particularly loquacious with his answers;
he gave mono-syllablic answers to almost half of Sykes’ questions and
wasn’t anymore forthcoming in his interview with AM this morning. The AM transcript is online here.

Sykes spoke to Kerry O’Brien on the 7.30 Report following his audience
with Rupert last night and you can find the full transcript here: http://www.abc.net.au/7.30/content/2004/s1082591.htm

And PM had an interview with Australia’s most colourful media analyst,
Roger Colman from CCZ, who was suggesting that Rupert had got his
timing all wrong: http://www.abc.net.au/pm/content/2004/s1082528.htm

Rupert crystallises his $10 billion tax-free gain

There is one group of News Corp shareholders who could campaign
hard against the Americanisation of the company and that is those
Australians who held the stock from before the introduction of capital
gains tax in 1985.

The largest, of course, is Rupert Murdoch who owns more than $10
billion worth of News Corp shares which would all be tax free if he
ever chose to sell.

However, the transfer of the stock to the Delaware-based company
will effectively crystallise those gains, so if Rupert’s stake was to
increase from $10 billion to $15 billion he would be paying capital
gains tax on that last $5 billion of profit.

Rupert’s News Corp stake is the largest single Australian “asset”
which could be sold without attracting tax. However, those institutions
that have been on the register for decades might not be too pleased
about giving up any further tax-free upside just to help attract more
US shareholders onto the register.

However, if Rupert can jack up the share price in the lead up to the
transfer, he will also be increasing those tax free capital gains and
raising the floor for future tax measurement.

Where are the true Murdoch independent directors?

The Murdoch family owns $8.8 billion worth of News Corp shares
but the family’s gross worth cracks the magical $10 billion mark thanks
to the 58 per cent stake in Queensland Press which controls The
Courier-Mail and other smaller Queensland titles.

Therefore, we are about to see Rupert Murdoch’s family interests do
a $1.5 billion related party transaction with News Corp’s “independent”
directors.

This will be one of the largest related party deals in Australian
corporate history and Crikey is not at all happy that former News Corp
executives are considered “independent” for the purposes of this deal.

The institutions need to move quickly to shove the likes of Ken
Cowley, Rod Eddington and Andrew Knight off this committee because they
are simply not independent due to their various periods as executives
hired and enriched by Rupert.

The same goes for former Phillip Morris chairman Geoffrey Bible. He
is a close mate of Rupert’s and not the sort of person you want
ensuring that minority shareholders who actually own 85 per cent of
News Corp are not getting done over by the most powerful man in the
world.

Rupert is already signalling that he wants to extract the highest
possible price, joking that the same multiple that Telstra paid for
Trading Post would be appropriate.

News Corp has already put the figure out there that Queensland Press
has $2.5 billion in net assets but the News Corp balance sheet
valuations are all over the place. For instance, BSkyB is still on the
balance sheet at zero and they are yet to properly recognise that 50
per cent of the NRL is not worth $150 million.

The independent directors of BSkyB were put in the hot seat when
Rupert wanted to parachute James Murdoch into the top job and, after an
almight bunfight, Rupert prevailed. Naturally, Rupert will want News
Corp to pay him as much as possible for 58 per cent of Queensland Press
and that is why need genuinely independent directors overseeing the
process.

If Rupert wants to sell 58 per cent of The Courier Mail, shouldn’t
he put it on the market and conduct a competitive tender. We suspect
News Corp will end up paying much more than any rival bidder would
offer and if News Corp was prepared to sell its New Zealand newspapers
to John Fairfax why shouldn’t Fairfax be allowed to bid and give price
guidance for The Courier Mail. Afterall, that is precisely what
happened with The Geelong Advertiser last year when News Corp bought it
in a related party transaction that was overseen by that so-called
“independent” Ken Cowley.

In terms of related party transactions they don’t get much bigger
than this. Solly Lew used to sell about $100 million worth of gear to
Coles Myer each year and Frank Lowy’s Westfield Holdings does reap
hundreds of millions of its various listed trusts each year in related
party transactions.

The other big one is Coca Cola Amatil which buys concentrate from
its Atlanta parent each year and also dropped almost $1 billion on that
Philipines play a couple of years back.

We really should work up a list of the largest related party
transactions ever undertaken in Australia. Please send all suggestions
to [email protected].