This week, it was reported that Starboard Value, the noisy, activist American private equity firm headed by Jeffrey Smith — once described as the “most feared man in corporate America” — has turned its focus to News Corp.
Reuters reported that Starboard recently became shareholders in the NASDAQ-listed company, although the size of the stake is not yet known. The Murdoch family trust controls approximately 40% of the voting shares in the company, and recently saw the resignation of patriarch Rupert after seven decades, replaced by his eldest son Lachlan.
Who is Jeffrey Smith?
Smith grew up in Long Island and studied economics at Wharton, before getting his start in mergers and acquisitions at financial services firm Société Générale.
His father founded the Fresh Juice Company, and Smith became director in April 1996, selling off the company in 1998 before moving to Ramius Capital, where he would eventually found Starboard as a division of the company before going independent in 2011.
What is Starboard?
The brainchild of Smith and Mark Mitchell, Starboard Value has its origins as part of Ramius Capital at the turn of the century before it merged with Cowen Group in 2008. The fund has developed a reputation as a bold activist force in the companies it invests in, often sending share prices through the roof in the process.
Starboard won seats at American web portal provider AOL in 2011, eventually winning shareholders US$1 billion (A$1.6 billion) the firm received from the sale of patents to Microsoft, and convincing the firm’s CEO to spin off its local news division. Starboard’s AOL stock subsequently skyrocketed by 250%.
The firm also saw the axing of office supplies retailer Office Depot CEO Neil Austrian amid the company’s merger with competitor OfficeMax in 2013, winning three board seats.
The company has reportedly replaced around 80 directors in 30 different companies, including motoring classified Cars.com, as well as Yahoo, Macy’s and Papa John’s Pizza.
In 2014, Starboard took a controlling stake in Darden Restaurants, owners of eatery chain Olive Garden. Smith reportedly criticised the amount of salt (or the lack thereof) on Olive Garden’s pasta, before proceeding to replace the entire board and become chair while owning less than 10% of the company — as well as boosting the share price almost 300% to date.
What is its relationship with News Corp?
What is currently known about Starboard Value and News Corp is murky at best — both companies remain relatively tight-lipped, and the size of the Starboard investment is unknown at the moment.
However, we do know that Smith is keen for News Corp to jettison its real estate holdings, including REA Group in Australia, which owns flatmates.com.au and realestate.com.au.
News Corp owns a 61.42% stake in REA Group, which is worth approximately $12.7 billion, according to the company’s 2023 annual report.
Smith told the 13D Monitor Active-Passive Investor Summit that News Corp’s valuation of $12.6 billion “does not make sense”.
“If News Corp separates the digital real estate assets through a tax-free spin … shareholders will see significant appreciation in the company’s share price,” Smith said.
“Our belief is they’re going to want to … separate the digital real estate assets to be able to highlight this beautiful business for what it’s worth.”
News Corp Australia’s executive chairman Michael Miller sits on the board of REA Group, as does former Foxtel boss Richard Freudenstein.
A News Corp statement earlier this week said the company was comfortable with its position in the market.
“We have always maintained an active and engaged dialogue with our investors and are committed to driving shareholder value,” said a spokesperson for the company.
“We remain focused on executing our strategic plan, which has helped us set records in profitability over the past three years. We are proud of our rapid digital transformation and bright prospects for long-term growth and value creation.”
The news comes after a turbulent year of corporate governance for the media empire, with the company slashing 5% of its global workforce in February (a loss of approximately 1,250 jobs, including Australian editorial roles), and backflipping on Rupert Murdoch’s signalled proposal to re-merge Fox and News Corp, split in the wake of the phone-hacking scandals of the early 2010s.
