Analyst Slams Rupert Murdoch's Family Deal For Shine

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Nomura's Michael Nathanson says the acquisition of the company of daughter Elisabeth Murdoch may hold back the stock and be "seen by some as more evidence that the company is not as shareholder friendly as its peers."


NEW YORK -- News Corp. shares may be held back by the company's agreement to acquire Shine Group - in part to bring its head Elisabeth Murdoch to the conglomerate run by her father Rupert, Nomura Securities analyst Michael Nathanson said Tuesday.

"We can’t help but think that News Corp.’s acquisition of a Murdoch family-owned company will be seen by some as more evidence that the company is not as shareholder friendly as its peers," Nathanson said in a report. "In fact, as happened post News Corp’s Dow Jones acquisition (albeit at a much higher purchase price), we think this deal will likely return News Corp. to the penalty box and restrain its multiple expansion for the near future."

He added: "So, despite the fastest cable network growth among peers, the benefits of retrans and reverse retrans at Fox and the potential accretive acquisition of BSkyB later this year, News Corp. could be shunned by some institutional investors who see more shareholder friendly actions and clear capital return strategies at other media companies."

The analyst said he had "erroneously believed" that the planned acquisition of full control of BSkyB would limit the conglomerate’s "ability to irritate shareholders" with additional deals. With that in mind, he had identified News Corp. as his top idea for 2011, and year-to-date, the stock has indeed climbed.

"While this potential deal represents only 8 percent of cash on hand, we worry that it may mark a near-term top for the stock," Nathanson said about the Shine transaction.

Class A shares of News Corp. fell almost 5.5 percent Tuesday to $16.74, while B shares slipped 5 percent to $17/80.