Wall St. Speaks Out on Murdoch the Elder and Empire of the Sons - Anthony DiClemente, Nomura Securities

In a move that had largely been expected but for specific timing it was reported that Rupert Murdoch will likely step down as CEO and hand the position to James Murdoch As part of the transition Chase Carey is expected to step down as coCOO but will presumably stay on as Vice Chairman for one year Rupert Murdoch will likely retain his role as Chairman of the Board but will be joined by his son Lachlan who will reportedly assume the title coexecutive Chairman While the timing of the transition remains unclear we expect the details to be discussed at the company39s next board meeting likely in the next few weeks after which a timeframe will be established for the transition We expect the handover to take place by the end of 2015 or the beginning of 2016 Given James39 increased involvement in FOXA business operations we do not expect the transition to result in a change in approach strategy at the company Chase Carey to assume position of Vice Chairman While Mr Carey is expected to step down as coCOO he is likely to remain at FOXA as Vice Chairman We are not surprised by Mr Carey stepping aside given the controlling stake held by the Murdoch family and the optout clause in the twoyear contract he signed last year Although he has an option to leave in December he is expected to stay during the transition Over the last few years James Murdoch worked closely alongside Mr Carey who was central to the robust growth in FOXA39s cable networks We expect the Street to welcome the news that he is likely to remain at FOXA as Vice ChairmanJames Murdoch takes the reins Throughout his tenure as CoCOO we believe James Murdoch has matured as a leader who understands the necessary changes in the digital age including the importance of targeted and interactive ads as evidenced by the company39s TrueX acquisition Given his increased involvement in budgeting and longterm strategy along with his growing relationships with the investment community we believe shareholders will largely approve his appointment as CEO We do not expect any major nearterm changes to strategy particularly as Rupert Murdoch will continue to oversee some of the daytoday operating activitiesWhat to do with the stock While we are cautious on broader advertising trends soft television ratings and the potential for downward earnings revisions if 2016E EBITDA guidance is reset we remain optimistic and view FOXA as an attractive stock especially at this entry point Further we are positive on FOXA given its attractive runway of highmargin retransmission consent fees peerleading exposure to highgrowth international markets and the considerable financial flexibility gained through the sale of its DBS assets that could result in higherthanexpected capital returnsPrepared by Nomura Securities International Inc For complete details of the research together with the associated important disclosures analyst certification valuation methodology and discussion of risks please see httpwwwNomuracomemaildisclaimerhtm Nomura Group manages conflicts with respect to the production of research through its compliance policies and procedures including but not limited to Conflicts of Interest Chinese Wall and Confidentiality policies as well as through the maintenance of Chinese walls and employee trainingThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillagecom management or associated bloggers

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Wall St. Speaks Out on Murdoch the Elder and Empire of the Sons - Anthony DiClemente, Nomura Securities

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Wall St. Speaks Out on Murdoch the Elder and Empire of the Sons - Anthony DiClemente, Nomura Securities

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