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Murdoch: Ballsy, Brilliant, Bold

The man never ceases to amaze me.

Rupert Murdoch is an absolutely brilliant and cunning dealmaker.

Is it just me, or should Rupert be brought in to run Yahoo!?

When he bid $60 per share or $5B for Dow Jones, I was impressed. The fact that he’s positioned himself to buy Facebook is equally impressive. But to filter a rumor and hurl a suggestion - through one of this own papers, the London Times - that MySpace would be spun off into Yahoo! and land Murdoch’s News Corp. a 25% stake is sheer bollocks. We’re impressed, considerably.

While a lot of the journalists will report on the merits of this, it should be noted that the general idea or baseline for a YHOO/NWS deal would be as such:

News Corp. boasts a market cap of $70B
Yahoo boasts a market cap of $37B.

In a general merger of sorts, Yahoo! would claim roughly 35% of a merged entity. Rupert Murdoch fought tooth and nail to excise John Malone and Liberty Media from News Corp.’s capital structure, and he will be damned if he gives up that much (read: any) control of his company.

But yet, in Yahoo!, he sees the best digital media asset out there, the most diversified Web company with 500M unique users per month, one that makes $5B per year in revenue and $1B in profits. And one, mainly, that is down but not out.

So what does he do: instead of framing the conversation in terms of a merger or acquisition, he suggests spinning MySpace - a company he bought for $580M just two years ago! - in exchange for 25% of Yahoo! implying a $10B valuation on his acquisition, which has already netted him $900M from Google and $X from Demand Media, when it bought back all non-MySpace assets from News Corp. Note that last year he suggested that MySpace was worth $6B, at a time when UBS was pegging all of FIM at $2B.

In other words, let’s partner up: but don’t take a stake in my company, let me take a stake in yours.

Murdoch is easily the most ballsy media mogul of them all. And this financial engineering is one more example of that.

But wait, there’s more. If you look at the recent “Crazy Like a Fox” article in Business Week, you’ll see that Murdoch does not need the cash per se, ie. he won’t sell an asset that is rising in value. Clearly, he knows something we don’t. That is: MySpace is growing ferociously but it is probably losing an inch every day to Facebook. Of course, at a $10B valuation, he’d be crazy not to sell.

Disclaimer: I used to work at News Corp. in 2005 and I own shares in Yahoo!

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Posted By: Ashkan Karbasfrooshan | Jun 20th

One Response to “Murdoch: Ballsy, Brilliant, Bold”

  1. Facebook is the Winner of MySpace-Yahoo! Talks : Forecast-Blog Says:
    June 20th, 2007 at 1:38 pm

    […] the darling of social networking no longer — that title now belongs to Facebook. As the blog WatchMojo.com speculates: “MySpace is growing ferociously but it is probably losing an inch every day to […]

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