News Corp break-up would unlock $7bn in value, says activist Starboard
Hedge fund wants Murdoch media group to spin off its online property listings business
Starboard Value has built a stake in News Corp and is pushing for billionaire owner Rupert Murdoch to break up the company, as legacy media groups face mounting pressure from shareholders to improve performance.
The activist hedge fund run by Jeff Smith announced the position at a conference on Tuesday, arguing that News Corp’s stock market valuation “does not make sense” and calling for a spin-off of its online property listings division.
“If News Corp separates the digital real estate assets through a tax-free spin[off] . . . shareholders will see significant appreciation in the company’s share price,” Smith said. Starboard estimates that a spin-off of the real estate business would unlock more than $7bn in value for News Corp shareholders.
News Corp shares are up 20 per cent this year, outperforming the broader US market and giving the group a valuation of $12.6bn. Its shares have climbed 5 per cent since Friday when Reuters reported that Starboard was taking on the Murdochs. The hedge fund has not disclosed the size of its stake in News Corp.
Investors have long complained that News Corp is worth less on the stock market than the sum of its parts — which include newspapers on three continents, financial information group Dow Jones, book publisher HarperCollins and a majority stake in the Australian property listings group REA.
Murdoch and his family trust controls about 40 per cent of the voting shares in News Corp, a source of concern for some shareholders who complain of a “Murdoch discount” that keeps the valuation of companies controlled by the billionaire depressed compared with media peers. Starboard on Tuesday pointed to the valuation of the New York Times, which trades at a higher multiple to earnings than Dow Jones, owner of the Wall Street Journal.
Murdoch, 92, last month stepped down from his role as co-chair of News Corp, relinquishing power to his son Lachlan.
Starboard’s incursion comes after the Murdochs in 2021 tried to combine News Corp with Fox, a deal that would have reunited the two halves of their media empire.
But after a pushback from independent shareholders, the Murdochs in January called off the proposed merger. Rupert and Lachlan Murdoch said the combination was “not optimal” for shareholders, a recognition of the reservations of big investors who feared the merger would fail to realise the full value of the assets.
The following month, News Corp revealed that a planned sale of one of its real estate assets — an opportunity for shareholders to unlock $3bn of this value — had fallen apart.
News Corp chief executive Robert Thomson has announced plans to cut staff by about 5 per cent this year because of macroeconomic challenges, such as inflation and rising interest rates, that have hit its businesses. For the year to June 30, News Corp’s revenue fell 5 per cent to $9.9bn. Net income for the year dropped to $187mn, a 75 per cent decline from the previous year.
Starboard is best known for pushing changes at software groups such as Salesforce and GoDaddy. Its new stake in the media conglomerate comes hot on the heels of a big success with a bet on Splunk, which last month announced a deal for it to be acquired by Cisco for $28bn.
Wyndham Hotels Rejects Takeover Approach From Choice Hotels
Proposal made public by Choice Tuesday involves significant business and execution risk, Wyndham executives said
Wyndham Hotels & Resorts WH 10.38%increase; green up pointing triangle rejected an unsolicited $7.8 billion takeover offer from Choice Hotels CHH -4.54%decrease; red down pointing triangle International.
The stock-and-cash proposal, which Choice made public in a so-called bear hug letter Tuesday morning, undervalues Wyndham’s growth potential and involves significant business and execution risks, Wyndham executives told The Wall Street Journal. Wyndham’s board also has concerns over the value of Choice’s stock, they added. Choice’s offer includes 45% stock.
Any deal would carry an extended regulatory timeline given the U.S. government’s aggressive stance on antitrust, with an uncertain outcome that could result in potential franchisee churn and excessive leverage at the combined company, the executives added.
Choice said it made an initial bid for Wyndham in April, confirming a Wall Street Journal report in May. The companies have continued to hold talks privately since then.
Wyndham said that last month it held multiple conversations with its suitor to discuss its regulatory and execution concerns, but that Choice was unwilling to address them.
On Sept. 27, Wyndham said it told Choice it was rejecting the offer.
Ukraine Fires ATACMS Missile at Russian Forces for the First Time
U.S. missiles were secretly deployed to Ukraine in recent days
Ukraine launched ATACMS missiles at Russian forces on Tuesday, marking the first time that the U.S.-provided weapons have been used in the conflict in Ukraine.
A small number of the missiles have been secretly sent to Ukraine in recent days, where they will augment Kyiv’s capability to carry out long-range strikes at Russian forces during an important stage of its counteroffensive, according to people familiar with the matter.
Ukraine has long sought ATACMS, a surface-to-surface missile that can strike well behind Russian lines and that can be fired by the Himars, or High Mobility Artillery Rocket System launchers, the U.S. has provided the country.
On Tuesday, the Ukrainian military’s communication department said on the Telegram messaging app that it “made well-aimed strikes on enemy airfields and helicopters near the temporarily occupied Luhansk and Berdyansk.”
The ATACMS models that were provided have a range of about 100 miles.
The U.S. decision to send the ATACMS, which stands for the Army Tactical Missile System, has been long in the making. Ukraine repeatedly said the missiles were essential to its war plan, giving it the range it needed to strike targets behind the front lines in Russian-held Ukrainian territory.
Ukraine’s Special Operations Forces said the attacks caused dozens of Russian casualties and destroyed nine Russian helicopters, an air defense launcher and an ammunition depot. It said the military struck the two airfields after receiving intelligence that Russia was using them as a major base for aircraft, military hardware and ammunition in the occupied territories.
Ukraine hasn’t officially confirmed the use of ATACMS. But in a speech posted to social media on Tuesday, Ukrainian President Volodymyr Zelensky hinted at the use of the new weapons provided to Ukraine.
“I thank those who are destroying at scale the logistics and bases of the occupiers of our land. We have results,” he said. “I thank certain partners of ours: effective weapons, just as we agreed.”
Yuriy Ihnat, the spokesman for Ukraine’s Air Force, said that long-range strikes against Russian air bases are a crucial part of Ukraine’s broader strategy of weakening Russian forces as Ukraine continues its counteroffensive.
Russian helicopters have menaced Kyiv’s forces that are trying to push forward in parts of the south and east, operating from a distance that makes them unreachable for most of the air defenses.
Ihnat said longer-range strikes against Russian air bases will force the Russian military to keep its choppers further from the front, easing the pressure on Ukrainian troops. As a result, Russian helicopters would need to fly further to reach the front lines, which would diminish their ability to apply firepower and give Ukrainian forces more time to track those flights.
Leonardo DiCaprio’s next role: investor in sustainable luxury watchmaker ID Genève
The Hollywood actor says the Swiss timepiece maker’s eco-innovative practices are an exemplar for the watch industry
Hollywood actor and environmentalist Leonardo DiCaprio will today be announced as an investor in ID Genève, Switzerland’s first luxury watch company to be awarded “B Corp” certification. DiCaprio’s investment is part of a $2mn seed round for the brand, which rose to prominence by only using recycled as well as reused parts and materials in its watches, including steel melted using the sun’s rays and watch straps made from green waste.
DiCaprio’s investment in the brand goes against the grain. It is common practice for luxury Swiss watch companies to pay A-listers to wear their watches as “ambassadors”; but rarely do celebrities invest in watch brands. Among the closest exceptions are seven-time Grammy winner guitarist John Mayer, who has invested in the watch media company and retailer Hodinkee, and footballer Cristiano Ronaldo, who recently became a shareholder in Chrono24, a pre-owned watch marketplace. Bezel, another US-based online watch reseller, lists actor Kevin Hart and musician John Legend among its investors.
DiCaprio told the Financial Times he had invested in ID Genève because it was “disrupting the luxury watch industry” and “championing ethically sourced and recycled materials and low-carbon footprint processes in a circular economy”. While the exact value of the actor’s investment has not been declared, “several Swiss family offices” participated in ID Genève’s first round of financing, according to the company.
Earlier this month, ID Genève achieved its B Corp status — an independent certification awarded to companies demonstrating enhanced commitments to environmental and social goals.
The watch industry overall has been slow to adapt to growing consumer appetite for sustainable luxury goods. Nicolas Freudiger, who co-founded ID Genève in late 2020 and is the company’s chief executive, said he expected the mix of his brand’s approach, the market’s receptiveness to products with a low environmental impact and DiCaprio’s advocacy to catapult his business forward. “In every industry, at some point, there are inflection points where a new technology or new brand becomes more interesting than others,” he said.
Freudiger, 34, said the investment will be made through convertible notes — a form of debt that can be converted into equity at a later date. He said this would happen automatically in two years’ time and would be based on the company’s market valuation at that date.
He added the conversion to equity would coincide with a Series A investment round that would fund the “ID Lab”: an innovation hub where the company plans to develop circular material and manufacturing technologies. Freudiger said he wanted the lab to “mutualise resources and encourage collaboration within the industry to accelerate the transition [to circularity in watchmaking]”.
Damian Oettli, head of markets at WWF Switzerland and co-author of a 2018 report that was critical of the watch industry’s poor environmental standards, is supportive of ID Genève’s model. “We like ID Genève very much,” he said. “They’re doing a great job and have a holistic perspective on sustainability. They also have B Corp certification, a framework that’s quite progressive.”
ID Genève watches are currently available in Switzerland, the US and the UK, including in Watches of Switzerland stores, where they retail from £3,700. Freudiger said 80 per cent of the company’s sales were through its ecommerce site and he expected to end the year having sold about 600 watches. The company has six employees — including the other two co-founders, Cédric Mulhauser and Singal Moesch — and is in profit, according to Freudiger, who previously worked for Coca-Cola in Zurich.
He admitted that “$2mn is a small amount in the luxury watch industry”, but that, together with DiCaprio’s name, would provide his company with “the opportunity to build partnerships and to connect with like-minded people with impact in mind to disrupt an industry”.
Watches of Switzerland Group said it would welcome the imminent announcement. “As a primary retail partner of ID Genève, we’re delighted to hear of Leonardo DiCaprio’s ringing endorsement of this eco-innovative brand,” said Kesah Trowell, the group’s head of sustainability. “We’re confident his involvement and personal investment will shine a bright light on sustainable innovation within the watchmaking world and contribute to ID Genève’s long-term success.”
ID Genève’s low-carbon production initiatives include steel cases made from waste material collected from the watch industry that is melted in a solar furnace, using the sun’s rays. The company claims the carbon footprint of its “solar steel” is 165 times lower than in standard steel.
Its watch straps are made from green waste gathered in London’s parks, and it works with the UK-based companies Magical Mushroom and Notpla to produce compostable packaging derived from seaweed and mycelium, the material structure found in fungi. It also uses refurbished mechanical movements, sourced from unsold stock made available by undisclosed Swiss watchmakers.
ID Genève is not the only Swiss watch company pursuing sustainability strategies in some form. Breitling has pledged to replace its gold with fully traceable ethical gold by March 2025, while Panerai is one of a number of brands to replace heavy watch boxes with lower-impact packaging, and Oris has announced a programme of carbon reduction.
Meanwhile, members of the Watch & Jewellery Initiative 2030, co-founded by Cartier and luxury group Kering last year, have signed up to the UN’s Sustainable Development Goals, a set of 17 targets for 2030. Adopted in 2015, these range from eliminating hunger to achieving universal access to water and education. Chanel, Montblanc and Gucci Watches are among the initiative’s 53 member brands.
But DiCaprio said the industry should do more. “Sustainability should be a core value at any company,” he said. “ID Genève’s pioneering efforts in this space are something I hope other companies take note of and continue to grow over time.”
Rolls-Royce: new chief needs steadier engine for long-term growth
Tufan Erginbilgic must prevent costs from creeping back in to maintain share rally
Restructurings at Rolls-Royce are a bit like British trains. There are plenty of them but they do not always reach their destination.
The failure of past turnarounds does not bother Tufan Erginbilgic. Nine months in as chief executive, he is going full steam. In his latest move, Rolls-Royce will cut up to 2,500 jobs, 6 per cent of its workforce.
Markets have expected cost reductions. Its shares are up more than 115 per cent this year. To maintain this rally, Erginbilgic must prevent costs from creeping back in. Just as important, he must set out where future growth lies.
Its three core businesses — civil aerospace, defence and power systems — largely operate as fiefdoms, with their own finance, legal, human relations and marketing staff. Power systems, which makes diesel engines for trains and ships, especially needs better integration.
The job cuts could strip out between £175mn and £215mn of costs, an amount largely expected by investors, says UBS. That would explain why Rolls-Royce has kept its full year £1.2bn-£1.4bn underlying operating profit guidance, which was upgraded in July. Analysts expect Erginbilgic to hit the top of that range, according to Visible Alpha estimates.
A stronger than expected post-lockdown bounce in air travel helps. Profitability at the core civil aerospace division is at the highest level for at least 15 years. An operating margin of 12.4 per cent still trails rival General Electric’s at 19 per cent.
Erginbilgic has promised to set out longer-term plans next month, a bigger test. For example, a move back into the higher volume single-aisle aircraft engine business would require a partner to scale up production.
There is more to do. Rolls-Royce still has about £1.4bn of unprofitable contracts it seeks to renegotiate. Also, Erginbilgic could trim some lower margin units, such as the power systems’ agricultural business. The Rolls-Royce share price run suggests investors will require more than this to trust that his restructuring avoids getting stuck in the sidings.