JANA Partners opens new positions in MNK, OUTR, NWSA, and HUN and sells HMA and AET—13F Flash C
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JANA Partners LLC is a value-oriented investment advisor specializing in event-driven investing exclusively for qualified investors. It was founded in 2001 by Barry Rosenstein. The fund primarily invests in the United States public equity markets and uses activist strategies, a market-neutral strategy, a long/short equity strategy, and a risk arbitrage strategy.
Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).
In this six-part series, we’ll go through some of the main positions JANA Partners traded this past quarter.
Why buy News Corp. (NWSA)?
News Corporation saw its share decline following its earnings announcement for 1Q 2014, as revenue fell 3% to $2.07 billion, missing analyst estimates. The company attributed the decrease to lower advertising revenues at the News and Information Services segment, foreign exchange fluctuations, and the sale of the Dow Jones Local Media Group. The group saw a 22% decline in revenue for its Australian newspaper business. However, it said the decline was partially offset by the inclusion of FOX SPORTS Australia, which News Corp. began consolidating in November 2012 following the Consolidated Media Holdings (CMH) acquisition, and continued strength in the Digital Real Estate Services segment. Revenue from the book publishing segment declined 7%, to $24 million, but ebook sales improved by over 30% versus the prior year and represented 22% of revenues—up from 15% in the prior year.
On June 28, News Corporation announced it has separated its businesses into 21st Century Fox (FOX), which owns the entertainment business, and News Corp. (NWSA), which owns the publishing business. The new News Corp. comprises the network of brands in news and information services, sports programming in Australia, digital real estate services, book publishing, digital education, and pay-TV distribution in Australia. The company had said the new structure would simplify operations and greater align strategic priorities and enhance overall shareholder value. Analysts have speculated that the publishing businesses were separated because they were underperforming compared to the pay-TV business. They added that News Corp. also wanted to contain the damage caused by the phone hacking scandal that led to the closure of the UK newspaper News of the World.
For the fiscal year ended June 30, 2013, the company posted a 3% increase in revenue, to $8.9 billion. It recorded a net income of $506 million for the fiscal year ended June 30, 2013, compared to a net loss of $2.1 billion in fiscal 2012—primarily due to the gain on the CMH transaction of $1.3 billion, the gain on the sale of the investment in SKY Network Television Ltd. of $321 million, and lower impairment and restructuring charges in fiscal 2013 of $1 billion.
The company is pursuing a strategy to improve its revenue prospects by being cost-conscious and transforming its publishing operations longer-term into multi-platform businesses. It plans to depend less on advertising, focus much more on subscription, and take advantage of mobile as a platform. It has set up a global advertising exchange to sell ad space in its 50 leading websites and mobile products and will discontinue any remaining arrangements with third-party ad networks. In 1Q 2014, it sold Dow Jones Local Media Group and its Live Event business at HarperCollins, which were considered non-core. It said it expects fiscal ’14 to be a transition year, when it balances ongoing operational efficiencies with prudent investments and focuses on stabilizing top-line performance.
Before starting JANA Partners, founder Barry Rosenstein was the managing partner at Sagaponack Partners, a private equity fund. Rosenstein is a CPA. He received his MBA from the Wharton School of Business at the University of Pennsylvania in 1984 and his BS from Leigh University in 1981.
JANA, which has approximately $7 billion under management, applies a fundamental value discipline to identify long and short investment opportunities that have one or more specific catalysts to unlock value. In certain cases, JANA can be an instrument for value creation by becoming an actively engaged shareholder.