Rupert Murdoch and his family are back in the good books of big fund managers: their domination of News Corp has been blessed by the world's biggest investor in Blackrock.
In intriguing changes to the News Corp share register ahead of the proposed split in the company, Blackrock has this week revealed the massive purchase of more than $US2 billion worth of shares. And in an apparently unrelated move, long-time holder and Murdoch supporter, Saudi prince Alwaleed bin Talal, has revealed he now has the power to dispose of 20% of his stake of 56.23 million B class voting shares.
Blackrock revealed on Wednesday night (Australian time) it had spent well over $US2 billion assembling a 6.87% stake ahead of the mooted split in the company into separate publishing and broadcasting companies.
In filing a "state of beneficial ownership" on Wednesday with the US Securities and Exchange Commission, Blackrock revealed it owned 105.551 million News A class shares. No purchase price per share was given, but News Corp shares have been trading at more than $US20 a share in the past year, meaning the purchases would have cost more than $US2.1 billion.
The shares are all A class, which means they are non-voting -- so the move is not a challenge to current management or the Murdoch's control over the company. But it does mean Blackrock will be one of the largest single disclosed holder of A class shares after the Murdochs. It also means Blackrock will emerge with 6.87% of the two companies when the split occurs.
Blackrock's filing was made because its holding had topped the 5% level when disclosure is required to be made. According to a recent list of major holders
of News A class shares from Morningstar
, Blackrock's holding doesn't appear directly (it could be hidden in one of the other holders).
The great irony is that Blackrock has been competing against News Corp in the market for A class shares: the company has spent more than $US6 billion since July 2011, buyback shares to support its price during the UK phone-hacking scandal and now the impending split. As of January 30, News said it had spent $US6.22 billion buying back more than 325 million A class shares.
The buying from Blackrock of more than 105 million shares means the cost to News of its buyback has probably been more than it should have been, and that Blackrock has paid more than it should have if the buyback had not been in place. News Corp shares ended at just over $27 in Australia yesterday, meaning they have more than doubled since late 2011. They ended at more than $US28.20 in New York this morning. The shares are up more than 45% since January last year and hit a series of new 52-week highs earlier this week.
The filing by Price Alwaleed yesterday in New York revealed he had amended his statement of beneficial ownership to reveal he now had "dispositive power" over 11.184 million B class shares. That's up from the 6.113 million shares listed in a filing on February 14, 2012. There was no explanation for the increase -- but you can't imagine the Murdochs allowing any of the prince's voting shares to become available for anyone to buy. The family would find a "friendly" buyer, or move to take control of the parcel, if it ever came onto the market.
News Corp reveals its second-quarter and first-half earnings next week in New York on Thursday morning, Australian time. The company has already released early details of the print arm in the split (to be called News Corp). Analysts are looking for more detail on the broadcast arm next week, as well as details of the boards of both companies. Blackrock's buying has soaked up many of the spare shares that News Corp hasn't mopped up in its buyback, meaning many institutions are underweight at News -- a situation that was originally driven by the bad publicity around the UK phone-hacking scandal.
If the financial details of the new broadcast arm are encouraging, other shareholders will chase the shares, boosting them even further.
The Murdoch family controls 40% of the company's votes despite owning just 12% of News Corp through their ownership of Class B common stock, which hold all the voting rights. The move to assemble such a large, costly stake in News A class shares is an enormous vote of confidence in Rupert Murdoch's continued dominance of the company by Blackrock, which manages more than $US3.3 trillion of money around the globe.