Southeastern Buys 12% Voting Stake in News Corp. – Bloomberg

Southeastern Asset Management Inc. (NWS),
the investment firm that joined Carl Icahn in opposing Dell
Inc. (DELL)’s buyout, acquired a 12 percent voting stake in News Corp.,
making it the largest shareholder after Chairman Rupert Murdoch.

The 23.8 million-share Class B stake, disclosed in a
regulatory filing yesterday, is valued at about $397 million,
based on a closing price of $16.72. The investment accounts for
about a 4.1 percent economic interest in New York-based News
Corp., the publishing business split off in June from Murdoch’s
film and television division.

Southeastern, led by Chairman and Chief Executive Officer
O. Mason Hawkins, has no plans to influence News Corp.,
according to the filing. The investment company, based in
Memphis, Tennessee, is known for value investing, though it has
occasionally tried to sway management. Hawkins and Icahn dropped
their opposition this week to Michael Dell’s $24.9 billion plan
to buy out Dell.

“There is a lot of value here that may not be fully
recognized by the market,” said John Janedis, an analyst at UBS
AG in New York. He has a buy rating on the stock and expects it
to climb to $19 within the next 12 months.

Share Classes

News Corp. has two classes of shares, and only Class B
shareholders have voting rights. The Class B shares rose 0.2
percent to $16.76 as of 10:07 a.m. in New York, while the more
widely traded Class A stock advanced 0.3 percent to $16.60. Both
stocks are trading at record highs.

Lee Harper, a representative for Southeastern, didn’t
immediately respond to a request for comment. Ashley Huston, a
spokeswoman for News Corp., declined to comment. The company
owns the Wall Street Journal and the New York Post and competes
with Bloomberg LP, owner of Bloomberg News, in financial news
and data.

Southeastern, founded in 1975, is an independent advisory
firm with $32.9 billion under management as of June 30,
according to its website. The company, which manages Longleaf
Partner Funds, generally takes large stakes in “competitively
entrenched, well-managed businesses purchased at steep discounts
to their intrinsic values.”

Southeastern’s biggest holdings at the end of the second
quarter included Chesapeake Energy Corp., holding company Loews
Corp., delivery company FedEx Corp. and satellite broadcaster
DirecTV. (DTV)

Easier Targets?

While Hawkins occasionally takes an activist role, doing so
at News Corp. would mean going up against Murdoch, a billionaire
who has built the News Corp. media empire over the past 60
years. Murdoch owns 39 percent of the Class B stock and a 14
percent economic interest in News Corp.

“Rupert has a big ownership holding in the company –
there have to be easier targets out there,” Janedis said.

Murdoch, 82, split up his two media companies following a
hacking scandal at its U.K. newspaper unit. News Corp. shut down
the weekly News of the World and Murdoch and his son, James, who
oversaw the division, testified before Parliament in 2011 about
the company’s response to revelations that reporters accessed
voice-mail accounts, including that of a murdered schoolgirl
named Milly Dowler.

In July, Murdoch agreed to testify to Parliament a second
time. British lawmakers asked for Murdoch to be recalled after
the transcript of a tape was published by Exaro News, in which
Murdoch told reporters at the Sun newspaper that bribery had
been a routine practice.

Shareholder Unrest

The scandal intensified concerns among some shareholders
about News Corp.’s governance. Proposals to separate the
chairman and CEO titles held by Murdoch and to eliminate the
dual-class stock system that allows Murdoch and his family to
retain control drew opposition at News Corp.’s annual meeting
last October. Investors excluding family holdings voted in
support of the two measures, even as Murdoch pressed forward
with a plan to split the company.

Saudi Prince Alwaleed Bin Talal is another large News Corp.
investor, with 6.6 percent of the voting shares, based on data
compiled by Bloomberg. He has supported Murdoch through the
hacking episode.

Southeastern previously teamed up with Icahn in a
shareholder revolt at Chesapeake Energy. Hawkins, 65, also
joined with investors advocating for a sale of Knight-Ridder
Inc. in 2005.

‘Grossly Undervalued’

In dropping his battle for control of Dell, in which he was
joined by Southeastern’s Hawkins in a counterbid, Icahn argued
the company was worth more. Southeastern sent a letter to Dell’s
board in February saying Dell “grossly undervalued” the
computer maker.

While they failed to win their prize, Icahn and
Southeastern took credit for obtaining a sweetened offer from
Dell and Silver Lake Management LLC. The latest buyout plan now
has enough votes to win approval, a person with knowledge of the
matter said yesterday.

“We are pleased that our efforts contributed to the modest
increase in merger consideration Dell stockholders will
receive,” Southeastern said in a statement this week.

To contact the reporter on this story:
Andy Fixmer in Los Angeles at
afixmer@bloomberg.net

To contact the editor responsible for this story:
Anthony Palazzo at
apalazzo@bloomberg.net