Murdoch's Heir Apparent Abruptly Resigns His Post

Times Staff Writer

Relinquishing his status as heir apparent in one of the world's most powerful media dynasties, Rupert Murdoch's elder son abruptly resigned as deputy chief operating officer of News Corp. on Friday, raising questions about who will eventually take the reins of the family-controlled conglomerate.

The departure of the 33-year-old Lachlan Murdoch, who was being groomed to succeed his father, appears to signal the ascendancy of Murdoch's younger son, James, 32, who runs News Corp.'s British satellite operations.

Were he eventually to replace his 74-year-old father as chief executive, James Murdoch would preside over a global empire that includes the Fox TV network, the Fox News Channel, the New York Post, the 20th Century Fox movie studio and satellite TV operations such as DirecTV that reach all corners of the world.

In the near term, Lachlan Murdoch's departure solidifies the power of Peter Chernin, News Corp.'s president and chief operating officer. Although Rupert Murdoch has said he has no plans to retire, some analysts believe that his well-regarded No. 2 could play a key role when the patriarch steps aside.

It was unclear Friday what caused Lachlan Murdoch to quit his executive positions, which include serving as publisher of the New York Post and overseeing the company's TV stations and Australian newspaper group.

According to several sources close to the family, tensions between father and son had intensified in recent months over a number of issues, including Lachlan Murdoch's opposition to the company's recent relocation to New York from Sydney and his frequent absences from the office.

Although Rupert Murdoch rarely if ever takes a vacation, Lachlan Murdoch took 10 weeks off last year to go mountain climbing and sail his yacht, one News Corp. source said. During that time, he drew a salary of $1.8 million and a bonus of $2.34 million.

Since the birth of his son, Kalan, in November, Lachlan Murdoch has spent weeks at a time in Australia, where he and his wife, former model Sarah O'Hare, have their primary residence, another company insider said.

Sources close to the family said Lachlan Murdoch also crossed swords with his father over a family trust that holds News Corp. shares. Rupert Murdoch's 1999 divorce settlement with his second wife, Anna, is believed to include a stipulation for assets to be held in trust for their three children -- Lachlan, James and older sister Elisabeth -- and Murdoch's daughter from a previous marriage, Prudence.

Sources said Murdoch's third wife, Wendi Deng, a former executive with News Corp.'s Star TV whom Murdoch married just days after his divorce from Anna became final, has been pushing her husband to change the trust. Deng, 36, wants their two young children, Grace and Chloe, to share in the spoils -- a proposal that Lachlan Murdoch has opposed, sources said.

But some close to the family speculated that Lachlan Murdoch's reasons for leaving were less about specific grievances than about self-determination.

"Lachlan earned his stature in the company," said Leo Hindery, a former cable executive who knows the Murdochs. "He came to the conclusion that he wanted to live his own life, not his father's."

Lachlan Murdoch's resignation is effective Aug. 31. He will remain on the News Corp. board.

"I look forward to returning home to Australia," he said in a statement in which he thanked his father "for all he has taught me in business and in life. It is now time for me to apply those lessons to the next phase of my career."

In the same statement, Rupert Murdoch said he was "saddened" by his son's decision, adding that he "respected the professionalism and integrity that he has exhibited throughout his career."

On Friday, Rupert, Lachlan and James Murdoch were unavailable for interviews. Chernin was also unavailable.

News Corp. spokesman Gary Ginsberg said Lachlan Murdoch's departure did not change the company's succession plan. "The reality is that Rupert is going to stick around as long as he's physically and mentally capable, and when he isn't, the board will make a decision," he said.

Friday's upheaval comes as cable mogul John Malone's growing stake in News Corp. has put some investors on edge. Last fall, News Corp. adopted a defensive "poison pill" measure to ward off the advances of Malone's Liberty Media Corp., which had unexpectedly doubled its voting stake in News Corp. to about 18%.

The Murdoch family controls 30% of News Corp.

Malone has since said he has no intention of making a run at News Corp. but was merely taking advantage of the bargain price of News Corp. shares in the wake of their shift from the Australian market to the New York Stock Exchange.

Yet talks between Malone and Rupert Murdoch about reducing Liberty's stake in News Corp. have stalled, making investors wary.

Some investors and News Corp. insiders have been dubious about whether Lachlan had what it took to run a multinational corporation. Several people close to the company said they felt for the Murdoch sons, who have strained under the burden of proving themselves to their father, Wall Street and News Corp. employees.

In a 2001 interview, Rupert Murdoch's second wife, Anna Murdoch Mann, said she wished none of her three children would succeed their father.

"There's been such a lot of pressure that they needn't have had at their age," Mann told the Australian Financial Review shortly after her 32-year marriage to the billionaire mogul ended. She predicted that there would be "a lot of heartbreak and hardship" over succession.

Since his father anointed Lachlan Murdoch as his heir apparent in 1998, News Corp. insiders and the media have been handicapping the rivalry as the brothers rose through News Corp.'s ranks. Spurring the competition, their father acknowledged at the time that though Lachlan was the front-runner, there was no guarantee that he would become chief executive.

Such equivocation prompted News Corp. executives to take sides. For instance, sources said Lachlan Murdoch's stint in Los Angeles, training under Chernin, was cut short because of the lack of affinity between the two. Instead, Lachlan returned to New York and worked under Mitch Stern, a Chernin rival who at the time was head of the TV station group.

Two years ago, when James Murdoch was named head of British Sky Broadcasting after helping to turn around News Corp.'s Asian satellite TV service, some saw the promotion as evidence that the younger brother was gaining ground. The move made James accountable for a public company, while Lachlan had little turf to call his own but the Post.

News Corp. sources said Friday that Lachlan Murdoch probably wouldn't be replaced because the divisions he oversees are run by strong executives. Merrill Lynch & Co. analyst Jessica Reif Cohen predicted that Chernin would take responsibility for the station group that Lachlan oversaw. Richard Greenfield, an analyst at Fulcrum Global Partners, said that would be a good thing.

"Anything that secures Peter Chernin's position is a positive," Greenfield said.

Shares of News Corp. fell 23 cents Friday to close at $17.34.

Lachlan isn't the first Murdoch to leave the family business. Daughter Elisabeth, 36, was considered a rising star at Fox Broadcasting Co. early in her career. After a stint at News Corp.'s British Sky Broadcasting, however, she left amid tensions with her father in 2000 to set up her own television production company in England.

In his parting memo to the News Corp. staff Friday, Lachlan Murdoch reminisced about his 11 years at the company, which started with the "early days cleaning presses on the old Daily Mirror in Sydney."

He looks back on some undeniable successes. Since becoming publisher of the money-losing New York Post in 2000, for example, he increased circulation by more than 40% and narrowed the newspaper's losses.

In a 2002 interview, Lachlan Murdoch told Editor & Publisher magazine that his father offered little coaching.

"He says to get a haircut now and then, and sometimes asks if I've had a shave," he said.

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Murdoch offspring

Rupert Murdoch, 74, has six children from three marriages:

From his 1956-66 marriage to Patricia Booker:

Prudence Murdoch MacLeod (age 46)

Lives in Sydney, Australia, with her husband and three children. Has not been involved in the family business, but in March she joined the board of Advertiser Newspapers in Adelaide, Australia, where her father's news empire was born.

From his 1967-98 marriage to Anna Torv:

Elisabeth Murdoch (age 36)

Had been considered a candidate to succeed her father before she quit as managing director of the News Corp.-controlled British Sky Broadcasting pay-television company in 2000. Now runs the London television and film production company Shine.

Lachlan Murdoch (age 33)

Had been considered the most likely successor to his father until Friday's resignation, which is effective Aug. 31. Has served as deputy chief operating officer of News Corp. and publisher of the New York Post since 2000.

James Murdoch (age 32)

Has risen in stature in his role as chief executive of BSkyB, a position he took in 2003 despite accusations of nepotism by some shareholders. Previously ran Star TV in Hong Kong and has also held other senior posts at News Corp., including executive vice president.

With his current wife, Wendi Deng, 36, whom he married in 1999:

Grace Murdoch (age 3)

Chloe Murdoch (age 2)

Compiled by Times researcher Scott Wilson

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