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Fox's (FOXA) Merger With News Corp Faces Heavy Opposition

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Fox Corporation’s (FOXA - Free Report) recent announcement of the merger with News Corporation (NWSA - Free Report) has been facing opposition from big shareholders.

Major investors like Independent Franchise Partners, a London-based investment firm fears that combining the two companies would fail to realize the full value of the company, which doesn’t serve well for them.

Instead, investors such as Irenic Capital have proposed the spin-off or break-up of News Corp’s assets and business divisions that will help simplify the working of the company.

Why is Rupert Murdoch Considering the Merger?

In October, Rupert Murdoch announced the merger of Fox Corporation with the media publishing company News Corporation to bring back high-profile business divisions under one roof after a split in 2013.

Murdoch sees potential moneymaking and cost-saving opportunities in joining the two companies. The new company could look for ways to integrate its media properties. It could also explore ways to use the company’s assets for emerging business lines, such as sports betting, for which Fox has already received a green signal in buying a stake at Fanduel.
The merged companies could potentially save money by hiring one management team and maintaining one set of relationships with vendors, the people said.

The advantage that Fox could draw from the merger would be to diversify and broaden the portfolio of Fox Corporation, hence gaining traction with more customers and adding new sources of revenue to its top line.

The publishing wing of Murdoch’s empire, News Corp, has been performing better than expected. The, part of its Dow Jones unit, enjoyed robust growth in its digital-subscription business over the past few years. During fourth-quarter fiscal 2022, Digital-only subscriptions to Dow Jones’ consumer products rose 9% year over year.

The digital real-estate unit and book-publishing business have also propelled growth. Revenues in the Digital Real Estate Services segment increased 7% year over year to $443 million in fourth-quarter fiscal 2022.

Shares of Fox Corp and News corp have declined 15.8% and 18.3% respectively year to date, outperforming the Zacks Consumer Discretionary sector, which fell 33.5%.

Despite such tailwinds, the merger could only be carried out successfully if the major shareholders of both companies are in support of it.

Concerns such as the redundant print-advertising model of News Corp, its reliance on countries outside the United States for the majority of its revenues during the ongoing foreign exchange fluctuation or the U.S. dollar gaining strength have to be addressed to the investors.

Zacks Rank and Stocks to Consider.

Fox Corp currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same sector are Liberty Media (FWONK - Free Report) and Hilton Grand Vacations (HGV - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Liberty Media have declined 5.4% year to date. The Zacks Consensus Estimate for earnings is pegged at 7 cents per share, which increased 150% over the past 30 days.

Shares of Hilton Grand Vacations have declined 19.3% in the same time frame. The estimate for earnings is pegged at 77 cents per share, which increased 7% in the last month.

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