News Corp: The Sun is Britain’s biggest newspaper, outselling its two tabloid rivals combined by 50 per cent. Yet it might fetch less than £500 million ($800 million), were Rupert Murdoch’s embattled News Corp to sell up. Add in The Times and the Sunday Times, and a deal might be struck for £800 million ($1.3 billion). His entire newspaper empire, including the Wall Street Journal, New York Post, and nearly 150 Australian titles, may be worth between $3 and $6 billion. The industry’s terrible economics, and the UK hacking scandal, both discourage M&A. But trophy buyers could emerge.
News Corp’s newspaper business makes up 18 per cent of group revenues, and 13 per cent of operating profits, mostly in Australia. Despite Murdoch’s apparent determination to retain the UK titles, a selloff may have attractions to News Corp's outside shareholders. Some directors may welcome the opportunity to free management to focus on higher-margin broadcasting businesses — and to put phone hacking firmly behind the company.
Judged on anything like normal commercial criteria, likely offers may not be that enticing. Rough estimates might value the papers at between a half and one-times annual sales. Half is a bit more than Richard Desmond paid for the UK’s Daily Express and Star in 2000. That is in line with the market value of Daily Mirror publisher Trinity Mirror. The UK’s Daily and Sunday Telegraph went for 2.1 sales in 2004 but that looks fanciful now, while the nominal sums Alexander Lebedev paid for The Independent and London’s Evening Standard look too pessimistic for three of Britain's strongest titles.
Worldwide, News Corp's newspaper arm had revenues of nearly $6.1 billion last year. Using the half-to-one times sales benchmark, that implies a value of $3.05-$6.1 billion for the whole division.
In Britain, The Sun and the now-defunct News of the World’s revenues totalled 654 million pounds in 2009-10. Assuming The Sun claws backs lost News of the World sales with a new Sunday edition, it might sell for up to 500 million pounds. Ironically The Sun’s most likely buyer may be Desmond — hardly a less controversial proprietor than Murdoch. The other main UK titles are loss-making. But with £392 million of sales they might get £300 million.
If the benchmark is the three times sales set when Murdoch bought Dow Jones — the owner of the Wall Street Journal — the sums could be a lot higher. Admittedly DJ wasn’t really a consumer newspaper business. But if that is where News Corp puts the bar, it is hard to see any buyers emerge. Not even the keenest of trophy seekers.
