Sweeps week at News Corp

Michael Hedges September 12, 2008

In comes News Corps pick for CEO at German pay-TV channel Premiere. It “came unexpectedly,” said the new guy. Also unexpectedly came prosecutors to News Outdoor’s Moscow office. So JCDecaux could sweep away that problem. Expect the unexpected, no?

Mark Williams – News Corps CFO for Europe and Asia – became interim CEO at German pay-TV channel Premiere (September 10). Michael Boernicke resigned with immediate effect, citing “personal reasons.” Williams joined Premiere’s supervisory board in April when News Corp increased it's share holding to 25%, clearly Premiere’s largest single shareholder.

Stock traders generally blessed the sweep. Premiere turned in rather lackluster financial results, blaming the high cost of sports rights, piracy and a bigger tax bite. Williams is James Murdoch’s “right hand man,” wrote Deutsche Bank analyst Paul Reynolds in a client memo. James Murdoch – The Younger – is News Corp CEO for Europe and Asia. The twitter for stock traders is, of course, the possibility that News Corp will make a clean sweep and buy out Premiere entirely.

The contrarian’s view is that News Corp has what it’s wanted, that being control in the boardroom. What, then, would be the point of buying the remaining 75% of Premiere? A Premiere spokesperson said no search for a permanent CEO is underway.

Williams met Premiere management Thursday morning (September 11), reported Reuters Deutschland. According to that version of events, he told the assembled multitudes he’d be dealing with Bundesliga rights, piracy and “new avenues for growth.”

“The surprising leadership change clarifies who calls the shots at Premiere,” added the Reuters reporter. When James - The Younger - took control of News Corp Europe and Asia remnants of the old guard were broomed.

Late Wednesday (September 10) the news broke in Moscow that News Corp had signed a letter of intent with JCDecaux to sell News Outdoor Group. News Corp will receive US$1.3 billion plus shares in JCDecaux, reported Vednosti which prints the Wall Street Journal and the Financial Times in Moscow. RAI Novosti (September 11) reported only that the deal is in ‘exclusive’ negotiation. Reuters and others set the price at US$1 billion.

Earlier this week News Outdoor Group, which is headquartered in Moscow, was raided by Moscow prosecutors office police (September 8) searching for evidence of corruption by the administrator of Moscow’s advertising office Alexander Menchuka. Offices, printing facilities and vehicles were searched between ten o’clock in the morning until 9 o’clock at night. Kommersant (September 9) had a long and detailed background report on corruption and alleged corruption centering around Mr. Menchuka and a State chemical company that bought 300 billboards and questions about where the money went. (Read here in Russian) News Corp issued a strongly worded statement condemning the action and denying any culpability.

The strongest words related to News Corps Russian business came in August when Mr. Murdoch – the Elder – expressed concerns the Russian government was about to seize the business. “The more I read about investments in Russia, the less I like the feel of it," said The Elder. A year ago News Corp said it would be looking for a ‘strategic partner’ for News Outdoor Group.

News Outdoor and other billboard companies rent space on and around building in Russian cities from city authorities. Moscow’s mayor has called for restricting the building sized billboard even as the ad revenue passes directly to city coffers. Moscow’s prosecutor is investigating the official committee that oversees advertising. In 2002 the State Prosecutor claimed that News Outdoor paid about 10% of fees owed to the city.

News Corp seems bound and determined to sweep away troublesome ventures, or ventures in troublesome places. There’s the bottomless pit Wall Street Journal to feed…and German football on TV. Not really unexpected, yes?