News Corp. Bids for Fox Shares

Seeking to consolidate its U.S. holdings under a single banner, Rupert Murdoch’s News Corp. on Monday proposed a stock swap worth $5.9 billion to buy the remaining shares it does not own in Fox Entertainment Group Inc.

News Corp., which already owns 82% of Fox, said shareholders would receive 1.9 News Corp. Class A shares for each Fox Class A share -- a value of $32.55 a share based on Monday’s closing price.

Fox shares closed Monday at $34.28, about 5.3% more than the value of the offer -- a signal that investors had expected a higher price.

Still, some analysts doubted that Murdoch would sweeten his bid. “We expect this to be News Corp.’s final offer,” said a Merrill Lynch research report by analyst Jessica Reif Cohen.

The offer has been widely expected as a result of News Corp.’s relocation in November from Sydney to New York and the subsequent addition of its shares to the Standard & Poor’s 500 index.

Murdoch said in October that he would consider buying full control of Fox, which produces about 75% of News Corp.’s revenue from assets that include the TV network, stations, a movie studio, cable channels and satellite broadcaster DirecTV.

Richard Greenfield, an analyst at Fulcrum Global Partners, said the move would simplify News Corp.’s corporate structure, giving shareholders just one investment option and saving the media giant about $8 million a year in public company reporting costs.

Fox stock has moved up over the last year in anticipation of Monday’s offer, which Reif Cohen of Merrill Lynch said represented an 18% premium over Fox’s 12-month average trading price. Fox shares have risen 18% over the last year.

By contrast, News Corp. Class A shares fell 52 cents Monday, to $17.13, and have risen 10% in the last year.

Fox shares are trading at their highest price since they were first sold to the public in 1998. That year, News Corp. raised $2.8 billion by selling 124.8 million shares of Fox at $22.50 each. Fox shares have gained 52% since the initial public offering, compared with a 6% price gain for the blue-chip Standard & Poor’s 500 stock index over the same period.

Greenfield, the analyst, said the transaction could make it easier for Murdoch to trade assets with cable mogul John Malone, whose Liberty Media Corp. in December increased its ownership of News Corp. voting shares to 18% by exercising an option to swap nonvoting stock for voting shares.

But Murdoch, worried that Malone was seeking to best his own family’s 29.5% voting position, immediately adopted measures to protect against a hostile bid.

Ever since, Wall Street has expected the two men to strike a deal to swap assets and reduce Malone’s stake in News Corp.

Greenfield said News Corp. would be able to trade Fox assets more tax efficiently if they were 100% owned.