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Murdoch’s empire to reincorporate in U.S.

By Harry Berkowitz

Fifty years after he inherited the Adelaide News and began building a global media empire, Rupert Murdoch said this week that News Corp. will trade the red-white-and-blue flag of Australia for that of the United States.

Murdoch said the company, whose global operations are already headquartered in New York, will reincorporate in the United States so its stock can gain the advantages of trading on the New York Stock Exchange as a non-foreigner and it can gain greater access to borrowing on more favorable terms.

Among the benefits, institutional investors that are restricted from investing much in foreign companies would be able to boost their investments in News Corp., said the Australian native, who became a U.S. citizen in 1985 so he could own American television stations.

As a Delaware-incorporated company, its stock becomes eligible for such indexes as the Standard & Poors 500. Inclusion would mean certain index mutual funds would have to own the stock, likely bolstering the price.

The shift would “have a tremendous positive impact on our company, on our future financial health and on our share price,” Murdoch said in a conference call from Sydney with analysts. Three of the biggest media investment firms that focus on indexing have a stake worth no more than $4 million in News Corp., while they own at least $900 million worth of Time Warner, Walt Disney Co. and Viacom.

More than 75 percent of the company’s revenue and profits are generated by its businesses based in the United States, which range from the Fox Network and cable TV channels to the Fox film studio and the New York Post. It recently gained control of DirecTV, the biggest U.S. satellite TV provider.

News Corp.’s limited-voting class A shares rose $2.14 to $35.03 Tuesday.

The company would rank about 95th on the Fortune 500 based on $20 billion in revenue for 2003, behind media giants Time Warner, Disney and Viacom. It rivals Disney in stock market capitalization at nearly $54 billion.

Murdoch, 73, was careful to stress he was not abandoning or lessening the company’s commitment to his native land.

“Like many of the million or so Australians who now dot the globe in all manner of occupations, News Corp’s roots, heart and culture are unmistakably Australian,” he said.

The Murdoch family’s voting stake in the company would slip slightly from 29.87 percent to 29.45 percent in the re-incorporation. The family’s holdings, including its 14-percent overall stake, are worth about $6.7 billion.

In January, John Malone’s Liberty Media gained the second-largest voting stake, of about 9.15 percent, and an overall stake of 17 percent.

Murdoch’s son Lachlan, 32, is deputy operating officer of the company. His son James, 31, is chief executive officer of British Sky Broadcasting, which News Corp. controls.

The expectation that one of them may take over as chairman has complicated discussions with highly regarded News Corp. President Peter Chernin for a new contract.

Chernin, who has said he would be happy staying at News Corp., is cited as a prime candidate to take the helm at Disney if the embattled Michael Eisner is ousted as chief executive there.

Distributed by the Los Angeles Times-Washington Post News Service