It was much more sedate than most Murdoch headlines: “News Corp Announces Resolution of Murdoch Family Trust Matter.” That innocuous phrase, “family trust matter,” hid the deep schism within the family that burst into public view in mid 2024.
The Murdoch family trust was created in 1999 during Rupert’s divorce from his second wife, Anna, and not long before he married his third, Wendi Deng. It sought to prevent Rupert’s four children from losing their inheritances to any other children he might father. Rupert controlled four of eight shares, and each of his four oldest children were given one each.
But the problem preoccupying the patriarch and his older son, Lachlan, in recent years has not been the threat from new arrivals but a conflict with the other three beneficiaries of the trust. After Rupert dies, they feared, James, Elisabeth and Prudence could well join together to out-vote Lachlan and dilute or change the editorial direction of the company’s media.
In December 2023 Rupert and Lachlan sought to change the “irrevocable” trust to ensure Lachlan’s ongoing control. The court, however, gave a clear victory to Lachlan’s siblings. The struggles continued: “For the Murdoch family,” the New York Times reported last month, “the last nine months have been filled with a flurry of warring sealed briefs, secret buyout negotiations and ever-mounting legal fees — some fifty lawyers are listed on the case docket — as they fought one final battle.”
That battle ended with a settlement bringing all outstanding litigation to an end. The three siblings, referred to in the trial as “the objecting children,” now became “the departing beneficiaries.” They will each receive $US1.1 billion, around 80 per cent of the current share value, and must resign from the trust. According to the Fox Corporation announcement, “They will be subject to a long-term standstill agreement [reported to be twelve years] preventing them, and their affiliates, from acquiring shares of Fox and News Corporation and taking certain other actions with respect to the companies.”
Those “certain other actions” have not been revealed but probably include a bar on investing in News Corp’s competitors and perhaps a pledge not to disparage the company’s activities, which would inhibit any public criticism of Fox News, for example.
James, Elisabeth and Prudence walk away not only with huge fortunes but also having escaped what would have been an all-but-impossible managerial challenge. How, for instance, would you turn Fox News into a more honest and professional news organisation? Any attempt would probably see an exodus of its audience to one of the other right-wing broadcasters, with a negative impact on the bottom line.
For Rupert the issue was also one of legacy: “Fox and our papers are the only faintly conservative voices against the monolithic liberal media,” he wrote in 2022. “I believe maintaining this is vital to the future of the English-speaking world.”
Securing control of the empire cost Lachlan and Rupert much more than it might have because their hamfisted strategy sharpened the lines of conflict in the family and locked in the other three siblings more solidly against Lachlan. After the verdict, their bargaining position also became much stronger.
Initially, the highest price Lachlan was prepared to pay for their exit was 60 per cent of the value of their shares, which they refused. Now he has paid around 80 pe cent of a much higher share price.
Will that extra expense have larger consequences? Raising $US3.3 billion — by selling shares and by taking out a loan — is a big task even for the Murdochs.
The empire has long been notorious for its dual-voting structure, which has given the family more than 40 per cent of the vote with fewer than 20 per cent of the total shares. The share sell-off potentially makes their control more vulnerable. At the moment they own 41 per cent of News Corp voting shares and 43 per cent of Fox voting shares. With the sale, the proportions will fall to 33 per cent and 36 per cent respectively.
That reduction isn’t likely to matter in the short-term. Shareholders are presumably happy with Lachlan’s leadership, and the value of both companies has been rising. Fox shares, selling at about $30 share in 2014, now change hands for $56.81; News Corp’s, around $17 in 2014, are now $33.97.
But if things go sour for any reason in the coming years, Lachlan could be vulnerable. The founder and builder of an empire enjoys a status and reputation that isn’t simply inherited by his successor. Nor does Lachlan show any sign of encouraging a more informed and vigorous board: when Jack Nassar, former chair of BHP and global chief executive of Ford, stepped down recently, he was replaced by Tony Abbott, who has never sat on a public board and has very limited commercial experience.
There have already been moments when Rupert has not always got his own way. In 2023 shareholders decisively blocked his attempt to re-merge the two wings of his media empire, which had been split following the phone-hacking scandal in Britain.
In the closest vote on the future of the dual-voting structure, in 2017, 90 per cent of non-Murdoch family shareholders voted to overturn the system (diluted to 49.5 per cent by the dual-voting system). With the trust’s recently reduced voting share, the non-Murdoch vote would have made up a majority. Although any such victory would be non-binding, it would have been an acute embarrassment, and would probably have eventually forced change.
But the real powder keg, according to Sydney Morning Herald business writer Colin Kruger, is the $US1 billion J.P. Morgan loan that will help cover the payout to the three siblings. The loan is secured against the Murdoch trust’s share in each of the empire’s businesses, so if things go badly wrong at any point family control will be over. Even now, such a large debt may inhibit the company from pursuing opportunities that require cash up front.
As it happened, such an opportunity beckoned even before the ink was dry on the family trust settlement. President Donald Trump offered Fox a place in a consortium he was organising to buy the US assets of TikTok, the world’s fastest-growing social medium. The short-form video channel carries a huge array of material — sports, entertainment, news and opinion — pitched at younger users and claims more than a billion worldwide visitors each month.
TikTok is owned by a Chinese company, ByteDance, in which the Chinese government has a “golden share” that gives it a veto over business decisions and the right to seek information from it. Many Western democracies see this link as a potential threat to national security.
The Biden administration argued that the channel, with 170 million US users, could be used by China to boost propaganda and undermine free expression. After securing considerable bipartisan support, Biden signed a law requiring ByteDance to sell its US assets to an American owner or have it banned in the United States.
Although Trump tried but failed to ban TikTok during his first term, but then reversed his stance and repeatedly pledged to save TikTok. The reason is not hard to find: he had become “a big star” on the app, and TikTok users who get their news from the site were one of the groups that swung most his way in last year’s election.
Where Biden worried about national security, Trump saw an opportunity for patronage. One of the four executive orders he signed on the first day of his presidency was a direction not to enforce Biden’s TikTok law. The following month he created a US sovereign wealth fund whose first investment would be in TikTok.
Two invited guests — Larry Ellison, co-founder of Oracle, one of America’s richest men and a strong Trump supporter, and Rupert Murdoch — watched him sign the order. They are among the half dozen American figures named as part of the group Trump is assembling. The US-owned TikTok will have a seven-person board, comprising national and cybersecurity experts. Six will be American; ByteDance will choose the seventh.
This is crony capitalism at its most blatant. Trump will essentially choose who the American participants will be. “Larry Ellison is one of them. He’s involved. This great guy, Michael Dell” — chief executive of Dell Technologies — “is involved. I hate to tell you this, but a man named Lachlan is involved. Do you know who Lachlan is?” Trump told Fox News. “And Rupert is probably going to be in the group.” They’re “American patriots,” he said. “They love this country. I think they’re going to do a really good job.” He also joked that he would like it to see lots of MAGA content on TikTok.
In return, participants in the new TikTok will have what amounts to a government-guaranteed cash cow. But the ticket to be a passenger on this lucrative gravy train is likely to be expensive. Trump has made clear “that he wants investors in the TikTok divestiture to pay the US government a ‘tremendous fee-plus’ for arranging it,” reported the New Yorker’s John Cassidy. Vice-president J.D. Vance has said the US company will be valued at around $14 billion (possibly “lowballing” TikTok’s value as a favour to friendly investors like Ellison and Murdoch). Others have estimated $30–$40 billion.
Putting considerations of corruption to one side, this is clearly a great investment opportunity. Can the Murdoch empire, with its newly acquired debt, afford to buy in? And will the commitments Lachlan incurred to free himself of his troublesome siblings inhibit what else he can do in the next few years? •
