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News Corp.'s $25 Billion Loss: Will BSkyB Acquisition Revive Company's Stagnating Stock?

Strategic Insights

— 1 min read

News Corp.'s shareholders have lost $25 billion since Rupert Murdoch offered 14.6 times Dow Jones & Co.'s profit to buy the Wall Street Journal in 2007. Now, Murdoch is poised to spend as much as 17 times earnings for British Sky Broadcasting Group Plc. News Corp. won approval from the U.K. to purchase the 61% of Britain's biggest pay-television operator it does not already own. This deal, which may require Murdoch to spend up to £1,000 per share, would be the most expensive for a Murdoch purchase, surpassing the 70% premium for Dow Jones.

Key Takeaways:

  • News Corp.'s shareholders have lost $25 billion since the Dow Jones acquisition in 2007, despite the company's market capitalization increasing from $72.6 billion to $47 billion.
  • The company's bid for British Sky Broadcasting Group Plc. will be the most expensive for a Murdoch purchase, requiring an estimated £1,000 per share.
  • BSkyB's 10 million U.K. customers and increasing earnings of 28% per share make it an attractive acquisition for Murdoch, despite concerns about the high price tag.
  • News Corp.'s slowest rate of earnings growth since 2005, at 4% this year, may be improved by the acquisition.
  • The shares currently trade at 13.6 times reported profit, lower than the average 17.7 times for media companies in the S&P 500.
  • Analysts project a 4% increase in News Corp.'s per-share earnings this year, while BSkyB's earnings are expected to rise 28%.

Statistics:

  • $25 billion: loss to News Corp. shareholders since the Dow Jones acquisition
  • 14.6x: profit multiple offered by Murdoch for Dow Jones & Co. in 2007
  • 17x: estimated earnings multiple for British Sky Broadcasting Group Plc. bid
  • £1,000: estimated cost per share for BSkyB acquisition
  • 28%: projected increase in BSkyB's per-share earnings
  • 4%: projected increase in News Corp.'s per-share earnings this year
  • 13.6x: current shares' reported profit multiple
  • 17.7x: average reported profit multiple for S&P 500 media companies

Sources:

  • Bloomberg News
  • Securities and Exchange Commission (News Corp.'s filing)
  • The Daily Star
  • Syndicate.Info

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