By Neil Chenoweth, ABC News
Rupert Murdoch and Lachlan Murdoch at the Allen & Company Sun Valley Conference, in 2017.
Photo: AFP / Getty Images / Drew Angerer
Analysis – Rupert Murdoch’s family has always been close. But if you really want to trace the extent of filial and sibling affection, you have to follow the money.
In a family which is so awkward about talking to each other that they sometimes use newspaper articles to communicate, cash is the great social lubricant.
The last great family split two decades ago, over Rupert’s desire to give Grace and Chloe, his two daughters with third wife Wendi Deng, equal standing in the Murdoch Family Trust, was settled with a little compromise and US$900 million (NZ$1.52b) in cash and shares to be split between the six children.
It didn’t heal all the wounds but it kept them talking to each other, after a fashion.
So where does this week’s rapprochement between Rupert and his unhappy older children, Prudence, Elisabeth and James, leave the family and the empire?
Into uncharted waters
After almost two years of fighting, a closed court hearing in Nevada and further legal wrangling, Pru, Liz and James will cash out of the trust in return for US$3.3b (NZ$5.57b), leaving their brother Lachlan, Rupert’s designated successor, with clear control of the Murdoch empire.
These are uncharted waters. First, it’s possible that not all three of the siblings agreed on the peace deal announced by News Corporation and Fox Corporation, which leaves Rupert’s designated successor Lachlan in total control.
Rupert only needed to convince one of his three unhappy children to agree to a deal, for the united front they held to collapse. That’s the mechanics of the current Murdoch trust. So a peace deal doesn’t necessarily mean playing happy families.
The insistence in the News Corp announcement that after the deal closes that “none of the Departing Beneficiaries will have any interest, directly or indirectly, in News Corp or in Fox Corporation” gives a hint of the bitter feelings here.
Not only are Prudence, Elisabeth and James out, they will have to stay out: “The Departing Beneficiaries will be subject to a long-term standstill agreement preventing them, and their affiliates, from acquiring shares of FOX and News Corporation and taking certain other actions with respect to the companies.”
While Lachlan comes out of this the winner, the deal leaves the Murdochs’ hold on News Corporation and Fox Corp looking more vulnerable than it has been in decades.
Lachlan, Rupert and James Murdoch.
Photo: AFP
Lachlan’s lowball offer
Of course in Murdoch world, identifying winners and losers is a relative thing, because everyone in this story goes home with a lot of money.
In 2019 when Rupert sold much of Fox Corporation to Disney for US$71b (NZ$120b), the Murdoch trust emerged with US$12.6b (NZ$21.26b) in stock, which meant each of Rupert’s six children picked up US$2.1b (NZ$3.54b)in Disney shares.
Relations between Lachlan and James had broken down, and Rupert encouraged Lachlan to buy his brother out of the trust. But Prudence and Elisabeth were also interested in selling out, which trebled the cost.
And Lachlan lowballed his family. He offered his three siblings 60 percent of the market value for their News and Fox shares held in the trust, or something around US$1.3b (NZ$2.2b). The price was too low and family relations quietly soured.
Lachlan came back in October 2023 with a plan to leave his siblings in the family trust while at the same time negating their voting power. He would achieve control at zero cost, which was a whole lot cheaper than his 2019 proposal.
That produced some caustic assessments last year in the Reno Probate Court, which overturned the new trust arrangement. But Rupert and Lachlan appealed, which promised to become a long running saga.
Over the American summer Rupert reportedly was in talks with his old friend and sparring partner John Malone to merge Fox Corp into Malone’s Warner Brothers Discovery. The deal would have removed Fox News from the family holdings, which would be one way to resolve one of the points of contention in the family feud.
But the deal foundered.
Fox News is typically more favourable to US President Donald Trump than other US networks.
Photo: AFP / Jim Watson
How will Lachlan pay for this?
Now Lachlan has secured his own legacy in a deal to pay his three siblings US$3.3b. That’s a bit of a haircut – it’s a 21 percent discount on the current market value of the stake. But it’s almost three times what he offered in 2019. Part of the reason for the higher price is the surge in Fox Corp’s share price, which in turn was triggered by the surge in earnings at Fox News due to Donald Trump’s resurgence.
The question is, how is Lachlan going to pay for the US$3.3b deal? Overnight Morgan Stanley did a book build to sell US$450 million (NZ$759m) of News Corp voting stock and US$900m (N$1.52b) of Fox Corp voting stock.
That’s US$1.35b (NZ$2.28b) in cash, with another US$1.95b (NZ$3.3b) still to raise in debt which will have to be serviced.
The Murdochs are selling precious voting stock because they had already sold almost all of the non-voting shares the trust once held, to finance earlier family peace deals.
The selldown has reduced the family voting stake in Fox from 42.7 percent down to 36.2 percent. And the News Corp stake is down from 40.2 percent to 33 percent.
That’s the lowest stake the Murdochs have held in the empire in decades. If a raider wants to make a run at the group’s most valuable arm, REA, then 33 percent of News may not be enough to cement Lachlan’s control.
The other jewel in Lachlan’s crown is Fox News, which is the powerhouse that produced much of the US$3b (NZ$5b) in profits that Fox Corp’s cable networks churned out in the last year.
Servicing the new debt in the family trust will make Lachlan even more beholden to keeping Fox News subscribers on side, following their remorseless moves further to the right. With a US$2b (NZ$3.4b) debt to service, Lachlan doesn’t have the room for expensive mistakes that alienate Fox News subscribers.
Rupert’s other children
And then there is the Wendi Deng wildcard. There is no payout for Deng’s daughters, Grace and Chloe, in the family peace deal. They will be stuck in there still with no control.
Together they are entitled to one third of the assets in the family trust, even if they can’t vote on decisions. In Murdoch world, trust beneficiaries only come of age when they turn 30. But as beneficiaries they could possibly derail this deal.
Or rather, their guardians/trustees could. That would be Rupert Murdoch and Wendi Deng.
It’s reported that Rupert reached out to his ex-wife to accept the deal, and Deng agreed.
No doubt she had her reasons, or her price. But unlike the fallout elsewhere in the family, we’re unlikely to discover what that was. That’s so Wendi.
– ABC News