Fox eyes ‘bolt-on’ M&A opportunities

Highlights from 21st Century Fox’s first investor call since Rupert Murdoch stepped down as CEO included Lachlan Murdoch saying the content giant did not have “material gaping holes”, but would continue to look at “opportunistic” acquisitions.

Murdoch Sr became co-executive chairman on July 1, with his sons Lachlan and James taking over the day-to-day running of the US-based operation.

Speaking to investors yesterday new co-executive chairman Lachlan Murdoch said the company, which owns the Fox broadcast network and half of Endemol Shine Group was “intensely focused on the array of opportunities that are emerging for 21st Century Fox and for our shareholders”.

Last year the firm opportunistically attempted a US$76 billion takeover of rival media giant Time Warner, but was unsuccessful. Lachlan Murdoch said this type of M&A strategy would continue, albeit likely on a smaller scale,  but that the 21st Century Fox was already in good shape.

“As we look at our portfolio businesses today, we don’t see material gaping holes,” he said, “but that’s not to suggest that we won’t pursue compelling opportunities. There may be opportunities to strengthen existing businesses with bolt-on acquisitions such as our investment in MAA TV in India, or to acquire and develop new capabilities, particularly in digital advertising and digital video generally.

“These will require investment from time-to-time, and we will be both opportunistic and disciplined as we evaluate the landscape, just as we have been in the past.”

Elsewhere in the call for the financial quarter ending June 30, new CEO James Murdoch bemoaned co-owning on-demand Hulu with rivals The Walt Disney Company and Comcast Communications, suggesting it would be more profitable to the firm as a fully-owned Fox asset.

“I would say when you talk about getting credit for the value, it’s a little frustrating, we do think it’s a great asset inside our portfolio, but similar to many of the non-consolidated assets in our portfolio, from our stake in Endemol Shine to the big one at Sky, it is a little frustrating, and we don’t believe we get the value for those assets,” he said.

However, he added the platform was “growing really well right now” and that it would soon have ten million customers for the paid-for Hulu Plus option.

“Hulu really has the velocity that it hasn’t had for years, so we’re very excited about that,” he added. “The growth is coming from a variety of places, [and] I don’t think it’s sort of a zero-sum game between Netflix or an Amazon Prime and Hulu. Seems like most customers or many, many customers will have both.”

Fourth quarter revenues at 21st Century Fox were US$6.21 billion, which has short of analyst predictions and was significantly down on the US$8.42 billion posted a year before. Income at the firm’s TV business arm fell US$32 million to US$113 million, which was attributed to lower ad returns and ratings for broadcast shows American Idol and drama The Following.

Net income was US$87 million, compared with almost US$1 billion a year before.