Rupert Murdoch standing in a pink shirt.
Rupert Murdoch had proposed reuniting News Corp and Fox Corporation, which split up nearly 10 years ago.Credit...Drew Angerer/Getty Images

Murdoch Backtracks on Plan to Merge His Media Empire

News Corp, one of his companies, said Rupert Murdoch had determined that a merger was “not optimal for shareholders of News Corp and Fox at this time.”

Rupert Murdoch has halted his plans to combine the two parts of his media empire.

News Corp, one of Mr. Murdoch’s media companies, said in a statement on Tuesday that he had determined that combining it and the Fox Corporation was “not optimal for shareholders of News Corp and Fox at this time.”

The boards of both media companies disclosed in October that Mr. Murdoch had proposed reuniting the two companies, nearly 10 years after they split up.

Both Fox and News Corp established independent committees of their boards to evaluate a possible deal. But the prospect faced significant investor pushback.

The deal, if it had gone through, would have put a collection of news and entertainment assets including Fox News, The Wall Street Journal, the Fox broadcasting network and TMZ under the same corporate umbrella. When it was initially proposed, Mr. Murdoch was said to be interested in the potential for cost savings and the possibility of integrating some of the companies.

Since the companies split, the media industry has gone through a wave of consolidation to compete with streaming giants like Netflix and combat the decline of the traditional TV business.

“Scale is important,” Lachlan Murdoch, the chief executive of Fox and Rupert Murdoch’s elder son, said in November. “Scale lends flexibility in many ways.”

But executives and investors had significant questions about the rationale of the deal. When Rupert Murdoch initially separated the two companies, he argued that Fox’s TV and movie business and News Corp’s digital media business were better off separate. Lachlan Murdoch had told investors in 2019 that the companies would not reunite.

Some investors questioned whether the deal would equally benefit both companies given News Corp’s valuable assets, like its sizable real estate business. Some also questioned whether Rupert Murdoch’s interests were more aligned with Fox, in which he owns a larger share than in News Corp.

In November, the activist investor Irenic Capital Management sent a letter to News Corp’s special committee questioning whether merging with Fox was a better alternative than other deals, like selling News Corp’s real estate business. Irenic owns about 2 percent of News Corp’s Class B shares. Those shares confer stronger voting rights than the more numerous Class A shares.

Shortly after, one of News Corp’s largest shareholders, T. Rowe Price, said in an interview with The New York Times that the proposed merger would probably undervalue News Corp, which it believed was trading for less than the company was worth.

Further complicating matters was the divergent performance of each company’s stock price — News Corp jumping about 26 percent while Fox inched up about 3 percent — since Mr. Murdoch’s proposal became public. His initial plan would have divided ownership among stockholders based on the market value of each company, but it did not specify how it would be divided.

The proposal raised questions about what it would mean for succession at the companies, with many believing a merger would give Lachlan, his father’s chosen heir, expanded power. Mr. Murdoch’s other son, James, wrote letters to the News Corp and Fox boards raising questions about the deal. It is unclear what those objections were.

A spokesman for Rupert Murdoch did not have additional comment.

The Murdoch Family Trust, which Rupert Murdoch controls with his eldest children, commands roughly 40 percent of the vote at both Fox and News Corp through its Class B shares. Any deal would have required the approval of a majority of investors who are not part of the Murdoch trust.

The two special committees for News Corp and Fox Corp have been dissolved, News Corp said in its statement. Both committees had made progress toward a merger in recent weeks when an outside firm offered to acquire a major part of News Corp, according to two people with knowledge of the move.

The CoStar Group, a provider of data and marketing services to the commercial real estate industry, recently informed News Corp that it was interested in acquiring the company’s stake in the digital real estate business Move at a valuation of more than $3 billion, the people said. After the talks with CoStar got serious, News Corp and Fox decided to put the merger talks on pause to await the outcome of negotiations with CoStar.

A spokesman for CoStar said the company continually evaluated opportunities for mergers and acquisitions, declining to comment on potential discussions with News Corp.

Fox is facing further challenges beyond its halted merger attempt. Fox Corporation and Fox News are being sued for $1.6 billion by Dominion Voting Systems in a defamation case over the network’s promotion of falsehoods and conspiracy theories about voter fraud in the 2020 election. Mr. Murdoch was deposed by Dominion lawyers last week, and the judge in the case has set a trial date for April.

Fox has argued that its actions were protected under the First Amendment and covered newsworthy statements made by former President Donald J. Trump and his allies.

In an email on Tuesday to News Corp staff, Robert Thomson, the company’s chief executive, said the withdrawal of the merger proposal would have no impact on current operations.

“We must focus steadfastly on creating the premium publishing, news, entertainment, intelligence and real estate products that were the catalyst for our record profits in the past two fiscal years,” he said.

James B. Stewart and Jeremy W. Peters contributed reporting.