The Murdoch family trust: how the scions could battle for control


Rupert Murdoch might be the most powerful man in news but for most of his career the 91-year-old fell short in one important respect: he did not have control of the family business.

For roughly four decades, Murdoch’s reign depended on the goodwill of his siblings, three Australian women far from the public glare. Until the 1990s, the press baron could be outvoted by his sisters Janet Calvert-Jones, Anne Kantor and Helen Handbury.

“The biggest threat to Rupert Murdoch’s control of News Corp was always his family,” says Neil Chenoweth, a Murdoch biographer.

The same dilemmas of succession, shared control and tangled family loyalties are now set to fall heavily on the Murdoch dynasty’s next generation. Murdoch’s media holdings are much smaller than in their heyday, but little diminished in influence across the English-speaking world. With a $27bn plan in motion to reunite the two halves — Fox and News Corp — one question looms: when the time comes, will the rest of the family let Murdoch’s eldest son and chosen heir Lachlan run the show?

Rupert Murdoch with his wife Anna Murdoch and their children Lachlan, James and Elisabeth at their home in 1989 in New York © Peter Carrette Archive/Getty Images

Murdoch found a working arrangement with his siblings without much trouble. At the behest of their late father, the sisters gave Rupert unwavering support while pursuing quite different interests outside the business. The late Anne Kantor ploughed millions earned from her brother’s conservative media machine into left-leaning causes, including a campaign to abolish nuclear weapons.

Only in the 1990s did Murdoch see advantage in buying them out. News Corp was loaded with debt and vulnerable to attack (the Murdochs have long relied on 30-40 per cent of voting rights to run the companies). Taking full ownership of the family stake tightened his grip at a depressed price, while crucially consolidating what could be left to his own children.

That has left Lachlan, chief executive of Fox Corporation and executive co-chair of News Corp, in the same position as his father once was. In a post-Murdoch world, Lachlan may be running the business without being in full command of the family stake, which is jointly held with his siblings Prudence (Prue), Elisabeth (Liz) and James.

Being Rupert’s chosen heir gives Lachlan the advantage. Yet in some ways, his challenge is greater. It is far from certain his siblings will be anywhere near as accommodating as Rupert’s sisters — or as straightforward to buy out.

James, who was overlooked for the succession, is scornful of Fox News, largely estranged from Lachlan, and has told friends he is determined to reorientate the business, with or without his brother. If forced to choose, the loyalties of his sisters Prue and Liz are, at this stage, uncertain, according to people familiar with the family dynamics.

Sir Keith Murdoch in 1951 at Rose Bay Air Base in Sydney. The newspaperman established no fewer than eight ‘inter vivos settlements’ for his children in 1936 and 1937 © Fairfax Media/Getty Images

Many business dynasties have coped with difficult transitions across generations simply by muddling through. And the structure of the trust holding the family’s interests favours continuity over change.

But Murdoch family members joke that the scriptwriters of Succession, the hit HBO show about a family battling over a fictional media empire, will have no shortage of twists for future seasons. Representatives for Murdoch, Lachlan, Liz, Prue and James declined to comment.

“There is going to be a lot of jockeying for position and a lot of ugliness, and Lachlan will not get away with maintaining the status quo,” says one veteran adviser to Murdoch, who argues the trust will ultimately be reshaped around one or another faction. “I can assure you: the status quo won’t hold.” 

Big changes are already on the horizon. Rupert and Lachlan in October backed the creation of “special committees” of independent board members to explore the merger of Fox with News Corp, reuniting entities split in 2012 to create a firewall from the phone hacking scandal.

The Murdochs cast the move as a way to build scale, remove duplication and create business opportunities. But for those gains, the risks seem high; big shareholders are in revolt, saying they do not believe a merger would realise the full value of the companies.

One veteran lieutenant to Rupert says history suggests more is at stake for the Murdochs: in the past, corporate shake-ups have pre-empted realignments of the trust or family payouts.

It was the case in the 1990s, when News Corp’s restructuring was followed by the buyout of Rupert’s sisters. In the mid-2000s, a “special committee” was established to move News Corp’s listing to the US, shortly before a revamp of the family holdings. Finally there was Murdoch’s momentous sale of 21st Century Fox to Walt Disney, completed in 2019, which allowed him to give an estimated $2bn to each of his six children.

Shareholders, veteran advisers of the media magnate and family members are now looking to the family trust to discern the purpose of the Fox-News Corp merger, and how it might recast the interests of the siblings.

“All roads lead there,” says one person close to the Murdochs. “It’s always about the family. A titanic battle is raging.”

The power of the trust

The Murdoch trusts have spanned almost nine decades, five generations and multiple family branches.

The newspaperman Keith Murdoch first established no fewer than eight “inter vivos settlements” for his children in 1936 and 1937, setting a high standard for complexity and tax efficiency that has since been embraced by his son Rupert and his descendants.

The names of the entities changed over the decades, as well as the domicile. But the core assets of the main trust were pretty consistent: the Cruden family farm near Melbourne, Rupert’s art collection and shares in Murdoch holding companies, which house scores of newspapers, Dow Jones, Fox News and the book publisher HarperCollins.

A family entity — today called Cruden Financial Services — manages key trust decisions and the voting rights of the shares. Murdoch remains in effective control. But since 1999, he has been constrained. When he left his second wife Anna in 1999 for Wendi Deng, the divorce settlement established unbreakable terms to hand down Murdoch’s wealth.

Rupert Murdoch with second wife, Anna, and 14-month-old daughter Elisabeth at their home in Sussex Gardens, London, in 1969 © Chris Ware/Keystone/Hulton Archive/Getty Images

Rather than seek her maximum entitlement, Anna demanded that Murdoch’s assets were put in trust both for her children — Lachlan, Liz and James — and Prue, Murdoch’s child from his first marriage.

The trust’s governance is crucial. Murdoch representatives hold four of the eight votes on Cruden until his death, while the children’s nominees have one each.

Cruden decides by majority on how to vote Fox and News Corp stock, according to people familiar with the working rules; there is no deadlock provision; if anybody litigates they are disinherited; and unanimous agreement is required to change the trust deeds or for any beneficiary to sell their stake or votes.

James, Liz, Prue and Lachlan, in other words, all wield a veto over fundamental changes. As Murdoch acknowledged in 2000, “If the kids fought hard enough, the whole thing would break down; there is no mechanism against that happening.”

It has left an increasingly tense situation, as Lachlan — whose views colleagues say are more conservative than his father’s — oversees a Fox News operation that James seems to consider a threat to democracy. While not naming Fox News directly, James in a 2021 interview with the FT chastised “insidious forces” behind the US Capitol attack unleashed by “outlets that propagate lies to their audience”.

Rupert Murdoch at St Bride’s Church in London with James (right) and Lachlan (left) for a ceremony of celebration a day after he married Jerry Hall in 2016 © John Phillips/Getty Images

When the next generation takes over, James’s associates are hopeful he will be able to muster the support of his sisters to reset priorities, outvoting Lachlan within family companies if needed. “Lachlan will be out, it is as simple as that,” says one person who knows James well, speculating at how the trust will vote on company appointments.

Others are more sceptical. Prue, who did not follow others into the family business, has kept good relations with all sides. “She is Switzerland,” says one friend of the family.

The same description is sometimes also applied to her sister Liz, who as a media executive is much closer to the family’s stock in trade. Yet while Liz has exhibited a more liberal outlook than her father, she has remained guarded about her allegiances. At News Corp’s most recent summer party in London, one guest noted Rupert was flanked by Lachlan, Liz and Prue. Only James was absent.

If family harmony is a goal, the omens are not good. Raffi Amit, a professor at the Wharton School of business who studies wealth management across generations of family enterprises, warned the Murdochs appeared to be “falling in every possible pitfall”. “Why? Because they don’t have a shared vision of what it is, as a group, they want to accomplish.”

Rupert Murdoch holds up a copy of the New York Post as the afternoon daily was back on the street for the first time after a 57-day strike in 1978 © Bettmann Archive/Getty images

The make-up of the trust has already caused one of the great Murdoch family rifts. Murdoch had two daughters with Wendi — Grace in 2001 and Chloe in 2003 — and soon asked that they be given an equal share of the trust. The eldest children balked; one aide at the time recalls Murdoch being “devastated”. “He spent his life protecting his fortune and could not share it as he wanted.”

A compromise was eventually reached in 2006. Around $100mn-$150mn was granted to each of Murdoch’s children and Chloe and Grace were taken into the trust — but as beneficiaries carrying no votes.

One other serious attempt was made to change the balance of power. After Murdoch sold 21st Century Fox to Disney, the family trust explored options to buy out James, according to people involved at the time. But ultimately the plan foundered over concerns it would leave the trust indebted.

There are provisions for the trust to be reconstituted at a certain point, with Rupert’s votes falling away even if he is alive, according to several Murdoch associates. Accounts differ on how soon; one person says it is still around a decade away.

Wendi Deng Murdoch (C) with her daughters Chloe and Grace at ‘Rei Kawakubo/Comme des Garçons: Art of the In-Between’ Costume Institute gala in 2017 in New York © Venturelli/WireImage

But there are no provisions to change the voting balance between the four eldest children in the near future, according to the three people familiar with the arrangements. Grace and Chloe will have no formal say over how the family trust is governed for at least another 10 years.

Whatever alliances emerge among the third generation, one thing is clear: the status quo suits Lachlan. The support of just one sibling within the trust is enough to block the use of company shares against him. The danger would be deadlock: if two siblings join forces in opposition to Lachlan, they could leave the trust unable to exercise its voting rights within News Corp and Fox altogether.

That leaves a workable yet unsteady platform for Lachlan — but he could strengthen it by buying out a sibling and gaining their vote.

The meaning of the deal

The plan to recombine Fox and News Corp has sent a crackle of intrigue through Murdochland: was it the first move in a bigger play to reshape the family interests and cement Lachlan’s position?

The stated rationale is to strip out management duplication and forge more co-operation on digital advertising and sports betting. The reunited $27bn company would also have more scale to pursue acquisitions.

Yet analysts, shareholders and some senior executives are convinced there is more to it. “We don’t think [the merger] is the end,” says Robert Fishman, an analyst at SVB MoffettNathanson. “This is just the beginning.” 

Lachlan has been the driving force. There is a window of opportunity to restructure: his father remains in control of Cruden, which accounts for around 40 per cent of the voting rights in Fox and News Corp. That is an essential prerequisite to any deal. “The merger is setting things up for [Lachlan’s] control,” says one adviser working with the Murdochs.

It means that Lachlan’s main hurdle is not his family but the other big shareholders. Top investors such as T Rowe Price and Independent Franchise Partners have already spoken out against a straight merger, while activist investors such as Irenic Capital have piled in with demands.

Securing shareholder approval will be fraught. At a minimum, Lachlan needs a majority of non-family holders of B class shares, which come with more powerful voting rights. But if News Corp is less than 60 per cent of the combined entity — today it would account for 40 per cent by market capitalisation — then class A shareholders will also vote. Winning that would be a tall order: the Murdoch family holding across both classes of shares is under 15 per cent.

Some investors are convinced the patriarch has more cards to play. “There is absolutely no way it is going to happen as proposed,” says one top shareholder in Fox and News Corp. “So if this isn’t happening, what is the plan?”

Speculation about looming asset sales is rife on Wall Street. “There is a lot of value here, and a lot of assets that don’t have to be together,” says a second significant shareholder in News Corp. “The pieces are in flux. That creates an opportunity . . . to solve puzzles — if they want to.”

Top of the list of potential disposals is News Corp’s 61 per cent stake in the listed Australian real estate business REA Group. It began as an unorthodox punt by Lachlan in 2000 that has since grown into a business with a $10bn market value. There are interested buyers, and it isn’t central to the Murdoch empire. The one potential hitch: colleagues say Lachlan feels vindicated by resisting James’s calls to sell in the past.

More drastic options might include bringing in a private equity partner, or spinning off either Dow Jones, the division that includes the Wall Street Journal, or Fox News, the most profitable part of the Murdoch empire. Speculation is swirling around both organisations, but current and former staffers are sceptical Murdoch would countenance such a move.

Whatever the option, people close to the process think Lachlan and his father face an inescapable choice on the empire’s future: sell assets, or ditch the merger plan. “It’s all up in the air,” says one longtime adviser close to the family.

Bound together

Disposals could clear the path for Lachlan to strengthen his position within the trust through a buyout or share swap.

But the transaction would need to be sizeable; James’s share of the trust might top $1bn once a control premium is taken into account. There are also doubts James would sell; friends say no amount of money would sway him given what is at stake.

“They will hang together, those four kids,” says Claire Enders, a media analyst who has tracked the Murdoch empire for decades. “They don’t need the money.”

She expects the future of weak legacy assets, including the newspapers in the UK and Australia, will be the real question for the next generation. “Everyone understands how Rupert feels, but no one else is going to pay for that,” she says.  

Friends say that Murdoch is in fine shape for a 91-year-old: physically more frail, but mentally as sharp as a tack. His powers of recall still strike fear in staff, and he remains as engaged as ever in politics.

When asked about succession, Murdoch once famously quipped that his aim was to “live forever”. Yet even if he were to dwell on what he will hand down, the structure of the trust leaves him few options to foster family harmony. His legacy is bound.

One potential, yet highly unlikely solution was suggested in 1988 by Anna Murdoch Mann, Rupert’s second wife and the mother of Lachlan, Liz and James. Her novel Family Business chronicles the life of Yarrow Maclean, a third-generation media baron who struggles with how to pass on her empire.

Tired of the fights between her children, which culminate in her chosen heir attempting to buy out his siblings, Yarrow takes the fateful decision to over-rule them all, and sell her empire. “It was harder to keep loyalty within the family,” wrote Murdoch Mann, “than it was to keep love or money.”

This article has been amended since first publication to clarify that News Corp would today account for 40 per cent by market capitalisation of a combined entity with Fox News

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