Is Rupert Murdoch Really Moving on from Fox and News Corp?

The next chapter in the Murdoch family drama

Rupert Murdoch’s bombshell retirement announcement on Thursday apparently ended some speculation over a real-life succession story that gripped the business world (and even inspired a must-watch fictional one). Murdoch, 92, will become chairman emeritus of Fox and News Corporation and named Lachlan, his elder son, as the designated heir.

But is Murdoch really hanging up his spikes? The Times’s Edmund Lee writes on why succession isn’t settled.

Murdoch isn’t about to disappear. In his farewell note to staff, he made clear he would “be watching our broadcasts with a critical eye, reading our newspapers and websites and books with much interest, and reaching out to you with thoughts, ideas, and advice.”

In his seven decades as a media baron, Murdoch’s favorite part of the job has been talking to his editors about big stories. He won’t stop doing that.

Murdoch still has a huge say in the companies’ operations. He is the majority shareholder of a family trust that owns significant stakes in each business. The trust manages about 40 percent of the voting stock in News Corp and 43 percent of voting shares in the more valuable Fox. In other words, he’s still in charge.

The real succession battle still looms. When Murdoch dies, four of his children — Lachlan, James, Elisabeth and Prudence — will have an equal say in what happens next because they will inherit his voting shares. And alongside his two other children from another marriage, they stand to inherit a fortune in some kind of deal for the companies. (The children made out nicely in the $71 billion sale of the majority of Fox’s assets to Disney in 2018, as each got about $2 billion.)

The revival of a failed deal could be in the offing. Murdoch tried to combine the two businesses last year, but called that off in January when shareholders balked. The hugely profitable Fox is driven largely by Fox News, and News Corp is now a hodgepodge that includes newspapers, digital real estate businesses and book publishing.

Both companies have shrunk severely over the years as the media landscape has been taken over by big tech and streaming. There hasn’t been a growth story to tell investors.

What to watch for: A potential sale of the media empire, either as a whole or in parts. Fox’s stock jumped 3 percent and News Corp’s shares were up 1.3 percent after Murdoch’s announcement, widely outperforming the S&P 500, which fell 1.6 percent.

HERE’S WHAT’S HAPPENING

Hard-right Republicans block a defense bill, dealing a blow to Speaker Kevin McCarthy. Hours after the top House Republican signaled that he had won over some holdouts, a handful of his party’s lawmakers opposed the measure, renewing doubts that a government shutdown can be avoided this month.

The White House tells federal agencies to consider climate change in procurement decisions. New Biden administration guidelines could affect where the federal government spends roughly $600 billion annually on goods and services. The directive was issued as a judge in Texas denied an attempt by red states to block a federal rule allowing employee retirement plans to consider E.S.G. issues when making investment decisions.

Biden says Abrams tanks will start arriving in Ukraine next week. The decision came as Volodymyr Zelensky, Ukraine’s president, visited Washington to shore up support for his country despite Republican opposition to the cost of aid growing louder. Meanwhile, the European Commission is reportedly a step closer to starting discussions that would allow Ukraine to join the European Union.

A big tech deal suggests antitrust fears are receding

Cisco’s $28 billion deal to buy Splunk, announced on Thursday, was notable for a number of reasons, including for being the network hardware giant’s biggest-ever takeover — and for what it may portend for the future of megadeals.

The move reflects Cisco’s belief that the transaction will withstand the increased scrutiny of mergers by the Biden administration and other antitrust watchdogs. It suggests that corporate leaders are increasingly confident that heightened opposition to M.&A. may not be such an impediment.

The deal doesn’t pose a problem for competition — at least not based on traditional antitrust views, Chuck Robbins, Cisco’s C.E.O., told DealBook. Splunk, which mines customers’ data for insights on security vulnerabilities and other matters, complements rather than competes with his company’s own offerings. “This is not a roll-up,” he said. “We don’t have a lot of overlap in our portfolios.”

Investors may need convincing: Though shares in Splunk jumped nearly 21 percent on Thursday, they’re still trading below Cisco’s offer price of $157 a share.

But C.E.O.s are taking comfort from recent setbacks for regulators, including the F.T.C.’s defeat in its effort to block Microsoft’s nearly $70 billion takeover bid for Activision Blizzard. That deal is poised to close, after Britain’s antitrust regulator said on Friday that the companies had taken action that “substantially addresses” its concerns; Microsoft and Activision are aiming to close the transaction by Oct. 18.

Executives and deal advisers say privately that Biden’s antitrust enforcers may be feeling more gun-shy after the Microsoft defeat. (A commonly cited piece of evidence is the F.T.C. withdrawing its challenge to Amgen’s $27.8 billion takeover of Horizon Therapeutics.)

That said, the F.T.C. and the Justice Department have at least publicly committed to aggressive enforcement. And the F.T.C. sued a big anesthesiology company on Thursday, challenging a common private equity strategy of rolling up small businesses to create a more powerful player.

That renewed confidence could help bolster the flagging deal-making business, which is down 28 percent year on year, according to LSEG.

Goldman’s top I.P.O. banker on the state of play

On Thursday, shares in the ad-tech company Klaviyo finished their second day of trading 12 percent above the price set in its initial public offering. That’s below the heights the stock touched on its first day, but better than what’s happened to shares in the grocery delivery app Instacart and the chip designer Arm, which are now just above their debut prices.

That’s disappointing for investors who bought into the companies on their first days of trading. But David Ludwig, the global head of equity capital markets at Goldman Sachs, who helped lead all three I.P.O.s, argues that the shares are actually performing as well as can be expected in turbulent markets — and that there’s hope for the future.

Some analysts said that the companies may have overshot on valuations. Arm priced its offering at $51 a share, the high end of its forecast range, while Instacart priced its stock at the top of an already raised range, and Klaviyo was priced above expectations. Shares in each popped on their first day of trading before drifting down.

Matt Kennedy, a senior strategist at Renaissance Capital, an I.P.O.-focused data firm, suggested that the companies may have miscalculated investor demand. “The next deals will have to price more conservatively,” he told DealBook.

But Ludwig noted that the markets have been choppy, with the Nasdaq down nearly 6 percent since the beginning of September and the S&P 500 down 4 percent. “The market backdrop has clearly gotten tougher,” he told DealBook. “In a market that’s not fully healed yet, I think it’s good that companies can get access to the markets in a fairly efficient manner.”

Market expectations for a sudden I.P.O. resurgence may have been overblown. Given uncertainty over inflation and the Fed’s plans for interest rates, deal makers have actually been pushing back their expectations for a revival into next year. The I.P.O. calendar for the rest of 2023 looks fairly quiet, save for a few notable exceptions like the sandal maker Birkenstock.

The companies that can go public now share a number of qualities, including profitability and — for the more mature companies — strong balance sheets not weighed down by excessive debt, according to Ludwig. But he hopes that will change: “We expect a moderate reopening in 2023, and as the markets stabilize, the I.P.O. window will likely open to a broader array of companies,” he said.

“There is a group of Tesla workers who are actively talking about forming a union.”

— Mike Miller, a regional director for the U.A.W. He told the The Times that Tesla employees were reviving efforts to unionize. In other labor news: Marathon talks between Hollywood executives and striking Writers Guild of America members ended last night with no deal.

Truth, consequences and FTX

As Sam Bankman-Fried, the founder of the failed crypto exchange FTX, prepares for his upcoming criminal trial, his parents are facing accusations too.

FTX debtors this week sued Joseph Bankman and Barbara Fried, longtime Stanford Law School professors, claiming they unjustly collected millions in cash, property and donations from the “family business.”

The claims are particularly notable in light of Bankman’s and Fried’s academic writings, which explore the nature of wrongdoing, honesty and consequences.

Bankman and Fried have written extensively about moral questions. Bankman, a tax expert, co-wrote a paper that proposes a fix for tax evasion: “changing the wording on existing returns to increase the psychological cost of evasion and increase the perceived expectation of detection.”

Fried is known for her work in legal ethics. Much of it focuses on consequentialism, a centuries-old idea that deems an action right or wrong depending on its outcomes. In a 2013 essay, she lamented a cultural enthusiasm for assigning blame, pointing to the 2008 housing crisis.

She noted soberly that “parental income and education are the most powerful predictors of whether a three-year-old will end up in the boardroom or in prison.”

FTX debtors accuse Bankman-Fried’s parents of ignoring “bright red signs,” and say they should have been able to see evidence of fraud at FTX companies. Bankman joined the FTX payroll last year and complained to his son that his $200,000 salary was inadequate; he wanted $1 million. The filing details other perks, including a $16.4 million property in the Bahamas and a $10 million payout.

The FTX debtors want to claw it all back.

THE SPEED READ

Deals

Policy

• David McCormick, the Republican former C.E.O. of Bridgewater who unsuccessfully ran for Pennsylvania’s governorship, is now hoping to unseat Senator Bob Casey, a Democrat.

• TikTok is fighting more potential bans, this time in Africa. (WSJ)

Best of the rest

• “​​China’s quest for human genetic data spurs fears of a DNA arms race” (WaPo)

• Meet the 34-year-old business school graduate who is now the face of Wagner Group, the Russian mercenary force whose former leader, Yevgeny Prigozhin, was likely assassinated last month. (WSJ)

• Victor Fuchs, whose work on understanding American health care costs made him a towering figure in his corner of economics, died on Saturday. He was 99. (NYT)

• Jimmy Carter entered hospice care seven months ago — and his health is defying everyone’s expectations. (NYT)

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