Murdoch Ditches Australia for Us

Rupert Murdoch drew a line under News Corporation's 55 years as an Australian company yesterday when he announced plans to incorporate the media group in the US.

The move, which reflects the fact that 81% of the group's profits are made in the US, is designed to improve the company's access to the world's largest capital market and increase its share price.

It also underlines the increasingly global nature of a company started by Sir Keith Murdoch, Rupert's father, with the purchase of a minority stake in the Adelaide News in 1949 and which has grown to encompass four British newspapers, the New York Post, satellite group BSkyB and the television channel Fox.

In a presentation to analysts, the 72-year-old chairman and chief executive of the company said yesterday that the proposal would "have a tremendously positive impact on our company's future financial health". He said News Corp's "roots, heart and culture" would remain "unmistakeably Australian".

The company, which has its global headquarters in New York, said it would hold occasional meetings in Australia between senior management and shareholders. The annual meetings in Adelaide headed by Mr Murdoch for the past 51 years attract large numbers of Australian shareholders who have been on the company's register for decades.

Mr Murdoch was at pains to play down the impact of the move on the group's operations around the world, and particularly in Australia. "This will have no discernible effect on the many Australian investors and the wider Australian market," he said.

"It will not cost a single Australian job ... [It] does nothing to lessen News Corp's commitment to Australia." The group will keep a minor listing in Australia.

US investors and analysts welcomed the decision. The share price rose more than $2 at the opening bell. Rich Greenfield, analyst at Fulcrum Global Partners, called it a "great thing for shareholders".

The reincorporation, which will take place through a share-for-share exchange, also involves News Corp buying the 58% of the group's Australian newspaper assets in Queensland Press owned by the Murdoch family.

This share swap will convert the Murdoch ownership of News Corp from an indirect one (via the QPL holding) to a direct one. Mr Murdoch and his family own about 14% of the company but control almost 30% of the votes.

"It has all been quite confusing," said Mr Greenfield. "That's why nobody ever really focused on it. Now it's all been simplified."

Analysts expect the reincorporation to narrow the gap between the non-voting and voting shares. The latter are dominated by Australian shareholders.

Mr Murdoch ruled out a change to this structure, saying: "We believe in a two-part structure. It gives stability and we think, as a result of that, it allows us to take risks and most of them have paid off extremely well."

Mike Gallant, analyst at investment bank CIBC, said the company traded at a 10% discount to media peers such as Viacom, partly because it was domiciled outside the US.

A main listing on the New York stock exchange would put the company in the S&P 500, thereby attracting index-tracking investment funds.

Company executives denied that the decision reflected a change in strategy or a move towards further acquisitions.

Following shareholder approval, the company could be reincorporated by the end of 2004.