News Corp. to acquire Elisabeth Murdoch’s Shine Group

Expanding its foothold in the European television production market, Rupert Murdoch’s News Corp. said it had struck an agreement to buy daughter Elisabeth Murdoch’s London production company Shine Group in a stock swap valued at about $674 million.

The acquisition thrusts a third Murdoch into a senior management role at the global media giant and could prompt scrutiny of the Murdoch-controlled News Corp. entering into a transaction that benefits one of the mogul’s family members.

The move also further consolidates the Murdoch family’s control over News Corp: Rupert Murdoch said Elisabeth would gain a seat on News Corp.'s board, joining brothers Lachlan and James. The Murdoch family trust owns about 38% of News Corp. Last week, Rupert Murdoch increased his ownership in the company, buying about 1.2 million Class A shares of News Corp. for $20.2 million.

News Corp.'s acquisition of Shine Group raises intrigue over who will eventually succeed the elder Murdoch, who turns 80 next month but has no plans to step down. He has long eschewed a succession plan, other than to make clear that he wanted one of his children to carry on what he considers the family business.


Murdoch’s 38-year-old son James oversees News Corp.'s operations in Europe and Asia and is considered in line for the top job. It is unclear whether Elisabeth Murdoch’s return to the News Corp. fold will complicate the picture.

Now Rupert Murdoch will have two of his four adult children in top jobs at the company. Elisabeth, 42, will continue to oversee Shine Group once the operation is swallowed by News Corp., according to people close to the companies. She told her staff Monday that running Shine would remain her focus.

News Corp. said Shine would be overseen by Chase Carey, News Corp.'s president and chief operating officer.

In buying Shine, News Corp. will secure a strong presence in the increasingly vital international TV production market.

During the last decade, Elisabeth Murdoch has built Shine into one of Britain’s largest independent production companies. Through a series of acquisitions, she has gobbled up companies in Denmark, Sweden, Norway, Australia, New Zealand and the U.S., becoming a leading producer of reality shows such as “MasterChef,” “The Biggest Loser” and “One Born Every Minute.”

The deal, which must be approved by News Corp.'s audit committee and board, is expected to close by March 31. European regulatory agencies also must give consent. Shine Group has operations in 10 territories.

The acquisition of Shine comes at a time when News Corp. is embroiled in a controversy in Britain over its $12-billion bid to consolidate control over satellite broadcaster British Sky Broadcasting. There have long been concerns that Rupert Murdoch has too much sway over Britain’s politics because of his media domination.

The price that News Corp. is paying for Shine is likely to draw attention. Shine generated $46 million in profit in 2009, the last year in which the company’s financial figures are available. News Corp. agreed to pay more than 10 times the production company’s earnings before taxes, interest, depreciation and amortization — on the high end of similar transactions in recent years.

In contrast, News Corp. in 2009 bowed out of the bidding for the Travel Channel when the price topped 10 times the channel’s earnings.

News Corp. said Monday that it would obtain an independent fairness opinion to evaluate the Shine deal.

“It’s a sticky wicket for the company,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “Any time a company acquires an asset owned by the son or daughter of the CEO, it is going to raise issues. The question is, is this a transaction that will ultimately be beneficial to the enterprise? The answer, for now, is: Who knows?”

When a corporation makes a purchase that could be considered a conflict of interest, “the company must make a strong case to investors that this is a valuable asset and that they are paying a fair price for it,” Elson said.

Neither Rupert Murdoch nor Elisabeth Murdoch was made available Monday for interviews.

In a prepared statement announcing the deal, Rupert Murdoch said: “Shine has an outstanding creative team that has built a significant independent production company in major markets in very few years, and I look forward to them becoming an important part of our varied and large content creation activities.”

Elisabeth Murdoch, who worked at Fox Television stations in California and was a programming executive at satellite broadcaster British Sky Broadcasting before leaving in 2001 to start Shine, had several reasons for wanting to sell, according to people close to her.

Minority shareholder Sony Pictures Entertainment has been looking to cash out, and Elisabeth Murdoch was not interested in bringing aboard new partners who would dilute her stake. On top of that, the European television production industry is consolidating, and Shine has considerable debt and lacks the financial resources to amass its way up to the next level, these people said.

“In a rapidly consolidating global TV industry, this alliance uniquely provides the conditions in which Shine Group can continue to lead and prosper,” Elisabeth Murdoch said in a statement. “News Corporation is the partner that enables us to maintain our aspiration to be best in class across all our sectors, and prepares and equips us for future growth.”

Elisabeth Murdoch owns 53% of Shine, Sony owns 20%, British Sky Broadcasting owns 13% and a smattering of minority shareholders hold the remainder. It is unclear how much of the $674 million that News Corp. is paying Murdoch will receive. The company had debt of about $80 million at the end of 2009, and there will be payouts to other managers who sold their assets to Shine as Murdoch built up her company, according to two people familiar with the transaction.

After a slew of acquisitions, Shine’s revenue has soared. The company’s revenue reached $418 million in 2009, up from $38 million five years earlier.