Fox Corp. COO John Nallen says the company is “much more focused on growing the business than we are on selling the business” despite accelerating pay-TV declines and other challenges.
In an appearance Monday at Deutsche Bank’s Media, Internet & Telecom Conference, Nallen was asked if the time may be right for Fox to consider selling given the likelihood of more consolidation in the media sector. Questions about the company’s future have multiplied as the pay-TV bundle has shrunk, given the company’s traditional linear holdings. Additional fuel for speculation came last fall when Rupert Murdoch stepped down as chairman of Fox and sibling News Corp. Murdoch turned 93 years old Monday.
“I was about to say we’re not good sellers, but five years ago we were good sellers,” Nallen dryly observed, drawing a few chuckles in the room. He was referring to the $71.3 billion sale to Disney of most of Fox’s prior incarnation, 21st Century Fox.
Turning more serious, Nallen went on to say that the idea of selling assets “hasn’t crossed our minds. Is there no inbound [interest] about it? I’m not suggesting that we’re open for business on it. In fact, we’re much more focused on growing the business than we are on selling the business.”
The option to sell or combine legacy media assets has been pursued by a number of major players including Paramount, Warner Bros. Discovery and Disney. Macroeconomic factors, including high interest rates, have posed a challenge, as has the regulatory climate.
As far as M&A on the buy side, Nallen asserted that Fox is “very interested in increasing the growth of the business through acquisition.” Those inclinations have been stymied by Fox’s flagging stock price, however. Shares have slipped 25% over the past two years, paralleling the downturns of most media stocks in that span. Five years into its existence as a stand-alone company, Fox’s stock is trading at a shade less than $30, well below the $40-plus level where it began in March 2019.
“There’s no one more frustrated on the valuation side than me, given what we’ve achieved,” Nallen said. “We’re not closed to opportunities in the industry. We’re just frustrated that from a currency standpoint that we haven’t found anything so compelling or accretive that we’d turn and say, ‘This is where we’re headed.’”
He maintained that the company’s balance sheet is “incredibly strong” and debt levels are “manageable.” But with an undervalued stock, “in lieu of finding a consolidation or M&A opportunity that’s so accretive to us,” more stock buybacks are the likely strategic choice because “that’s the best return our shareholders can get right now n deploying that capital,” he said. “But I’m hopeful that the remaining shareholders, net of the buyback, are going to enjoy a lift in valuation and a lift in growth, either through organic investment, M&A or other deployments of capital.”
Nallen said he hoped that cord-cutting rates, which are currently shaving more than 8 million subscribers a year from the pay-TV bundle, will moderate in the coming years. Asked about carriage renewals, he said the company has no agreements expiring for the rest of fiscal 2024, but in the next fiscal year about one-third of the company’s pay-TV footprint will come up for renewal. While the company has had at times “intense” negotiations with distributors, he said, it hasn’t had blackouts of late.
