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A Murdoch at Disney Would Bring Experience and Baggage

Image: A Murdoch at Disney Would Bring Experience  and Baggage
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Thursday, 07 Dec 2017 07:44 AM

With Walt Disney Co. and 21st Century Fox Inc. discussing a historic combination of their businesses, one question keeps coming up: Could a Murdoch end up running Disney?

Disney, the world’s largest entertainment company, is in talks to buy Fox assets in a deal that could approach $50 billion or more.

The companies have held on-again, off-again negotiations for more than a month for properties including the FX cable channel, the Sky pay-TV service in the U.K. and Fox’s film and TV studio in Los Angeles.

James Murdoch, 44-year-old son of founder Rupert Murdoch and Fox’s chief executive officer, could move to Disney if offered a senior role there after a deal. That possibility evokes strong responses from admirers and detractors of the Murdochs and their reign over the Fox media empire. 

Some investors and analysts say there are few executives with James’s experience building and running an international media business. Others question whether Disney ought to employ an executive who’s led a company embroiled in scandal, including phone hacking in the U.K. and sex harassment at the top of Fox News Channel.

“There are two ways to look at it,” said Richard “Trip” Miller, a Disney shareholder at Gullane Capital Partners. “The Murdochs have been very adept at creating value for shareholders over the long term. On the other hand, some of the more tabloid things the Murdochs have done give one pause.”

Fox, based in New York, declined to comment and said James wouldn’t comment either.

A deal with Burbank, California-based Disney isn’t certain. Fox, led by Rupert, James and another son, Lachlan, isn’t talking exclusively to Disney. There’s a chance Comcast Corp. could sweep in with a better offer, or that nothing happens at all.

James’s Plans

But taking a role managing some of the assets sold to Disney, with a potential path to the top job at the movie, TV and theme-park giant, would be an elegant exit for James. He’s had his hands full with the barrage of scandal at Fox News, an organization he has technically overseen but has limited control over.

While his father has championed conservative causes, James Murdoch and his wife Kathryn founded Quadrivium, a foundation focused on promoting science, equal opportunity and environmental causes. That aligns him more politically with Disney’s CEO Bob Iger, who quit President Donald Trump’s advisory panel over a climate policy dispute earlier this year.

Entrepreneurial like his father, James dropped out of Harvard University in 1995 to back a record label that spawned hip-hop acts Mos Def and Talib Kweli. He was the youngest CEO of a FTSE 100 company after his father appointed him head of Sky, and he was a rising star as head of international operations at News Corp., which owns the Wall Street Journal, Times of London and the Sun.

“I interviewed James 10 years ago when he was a bright young man on the way up,” said Stefan Stern, a visiting professor of corporate governance at the University of London’s Cass Business School. “We know what happened next.”

Revelations that employees at the News of The World, a News Corp. paper, had hacked into the voicemail of celebrities and other public figures cost James his job at News International in 2012 and his chairmanship of Sky. The Murdochs weren’t accused of wrongdoing, and no charges were brought against them or their company.

Sky Bid

But the Murdochs were forced to abandon News Corp.’s effort to buy out other investors in Sky, and James was criticized by U.K media regulator Ofcom, which said he had failed take action. News Corp. said the decision wasn’t backed by evidence.

Murdoch spent the following years building himself back up, moving to New York and eventually rising to co-chief operating officer for 21st Century Fox, the media business split from News Corp. in the wake of the hacking scandal.

He played a role in Sky’s 2014 acquisition of Fox stakes in Sky Deutschland AG and Sky Italia, and led Fox’s investment in Vice Media Inc. In July 2015, he became CEO of Fox.

A year later, the Murdochs were engulfed in another scandal, with accusations of sexual harassment leveled against Fox News Channel founder Roger Ailes and later on-air star Bill O’Reilly, the most-watched personality on cable news. 

The new scandal has complicated the Murdochs’ second bid to gain full control of Sky, contributing to extensive reviews by U.K. officials, this time including Fox’s handling of the harassment cases. In determining Fox would be a fit and proper owner of Sky, Ofcom noted James and Lachlan had revised Fox’s corporate governance to prevent future misconduct.

The U.K.’s Competition & Markets Authority this week delayed the release of its initial findings on the takeover bid to mid-January, about a month later than originally planned. Sky’s shares have advanced 9 percent over the latest week as speculation mounted that a deal between the Murdochs and Disney is close and that Comcast is pursuing a rival deal where it is interested in seeking full control of Sky. Advancing to its highest since Fox made the bid a year ago, Sky rose as much as 3.5 percent to 1,023 pence in London on Thursday.

While a role for James at Disney isn’t part of the negotiations, according to people with knowledge of the matter, a deal could offer him a future there.

“There is no doubt Bob Iger admires James, and Disney’s single biggest international relationship is with Sky,” according to Claire Enders, a founder of Enders Analysis, a research firm in London. As a supplier of programming like ESPN and the Disney Channel, Disney maintains close ties to pay-TV providers such as Sky.

Potential successors to Iger have left Disney over the past few years and the board has extended its CEO’s retirement date four times, a sign no inside candidate has wowed the directors. There is “no one inside of Disney who is as qualified” to succeed Iger as James Murdoch, said Brian Wieser, an analyst with Pivotal Research Group.

Given a chance, James could prove himself over time, particularly if Disney’s board extends Iger’s contract again beyond the current July 2019 expiration. CNBC and the Wall Street Journal said Wednesday the contract could be extended if Disney did a major deal with Fox.

Governance Issues

Yet the idea of James Murdoch taking a senior role at Disney or succeeding Iger elicits strong reactions from governance experts.

“James, despite his personal ambitions, has little credibility to be seen as a successful business builder, a prudent captain of shareholder assets or a sensible guardian of public trust as a media baron -- or any business not controlled by the legacy of his dad’s wealth,” said Jeffrey Sonnenfeld, a senior associate dean for leadership studies at Yale University’s School of Management.

© Copyright 2017 Bloomberg News. All rights reserved.

   
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With Walt Disney Co. and 21st Century Fox Inc. discussing a historic combination of their businesses, one question keeps coming up: Could a Murdoch end up running Disney?
murdoch, disney, fox, james murdoch
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2017-44-07
Thursday, 07 Dec 2017 07:44 AM
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