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ValueAct Capital’s Position Change in Twenty-First Century Fox

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ValueAct Capital and Twenty-First Century Fox

During 4Q14, ValueAct Capital sold its stake in Twenty-First Century Fox-A (FOXA). The fund increased its stake in Twenty-First Century Fox (FOX). The fund holds 30,300,000 shares of FOX, which account for 7% of the total 4Q14 portfolio.

In July 2013, News Corp (NWSA) separated its business from Twenty-First Century Fox (FOXA) (FOX). FOXA are “class A” shares and FOX are “class B” shares.

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Overview of Twenty-First Century Fox

Twenty-First Century Fox is a diversified global media and entertainment company that is home to a number of cable, broadcasting, and film networks and properties. The company operates in five segments:

  1. Cable Network Programming, which consists of the production and licensing of programs
  2. Television, which consists of broadcasting of network programming in the US
  3. Filmed Entertainment, which consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide
  4. Direct Broadcast Satellite Television (or DBS), which consists entirely of the operations of Sky Italia and Sky Deutschland AG. But in November 2014, Fox sold Sky Italia and its 57% stake in Sky Deutschland AG. After the sale of DBS business, the company continues to report the DBS segment for the purpose of comparison
  5. Other, Corporate, and Eliminations

According to Box Office Mojo, Twenty-First Century Fox’s 20th Century Fox studio had the largest market share in domestic box office receipts in 2014. Time Warner Cable’s (TWX) Warner Bros. studio and Comcast’s (CMCSA) Universal Pictures studios were also among the top five film studios in the market. You can gain exposure to Fox by investing in the PowerShares QQQ Trust (QQQ). Fox accounts for 0.94% of QQQ.

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Disposal of Sky Italia and Sky Deutschland

In November 2014, Fox sold its 100% stake in Sky Italia and its 57% ownership in Sky Deutschland to television behemoth BSkyB (British Sky Broadcasting Group) for about $8.8 billion. Fox received $8.2 billion of this amount in cash and $650 million of that went into buying a 21% interest in BSkyB’s National Geographic Channel (or NGC) International. This acquisition took Fox’s ownership stake in NGC International to 73%.

Strong 2Q15 performance

Excluding revenues from the DBS segment (in which Sky Italia and Sky Deutschland had operated), Fox’s revenues grew 10% year-over-year to $7.4 billion. This increase represented higher revenues from the Cable Network Programming segment and higher theatrical revenues from the Filmed Entertainment segment.

Excluding sales gains for the DBS business and other one-time events, adjusted net earnings came to $1.1 billion, or $0.53 per share, compared to $756 million or $0.33 per share for the corresponding quarter in the previous year.

In the next part of the series, we’ll discuss ValueAct’s position change in Agrium.

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