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Fox Entertainment Shares Climb 8.9% in 1st Trading Day

November 12, 1998| From Bloomberg News

NEW YORK — Fox Entertainment Group Inc.'s shares climbed 8.9% on Wednesday after the producer of "The Simpsons" and "The X-Files" raised $2.81 billion in the third-biggest initial public offering in U.S. history.

Fox rose $2 to $24.50 in trading of 48.7 million shares, making it the most active stock in U.S. markets. Fox's parent company, News Corp., had sold about a 20% stake, or 124.8 million shares, at $22.50 each.

The IPO gives News Corp. Chairman Rupert Murdoch more cash to pay some of News Corp.'s $9 billion in debt. He also may use the proceeds to build the company's sports business, which includes the Los Angeles Dodgers baseball team and half of the Fox Sports channel.

"Nine billion is a lot of debt. The lower they get that immediately, the better off they are to make acquisitions," said Barry Hyman, an analyst at Ehrenkrantz King Nussbaum Inc. "We will see Fox expand into sports a little bit more."

News Corp., the world's fifth-largest media company, traditionally has borrowed heavily to fund its purchases of media properties. Because of its debt load, Standard & Poor's rates its debt BBB-, the lowest investment-grade rating.

Sports is a key part of Fox's strategy of appealing to the audience that advertisers covet: 18-to-45-year-old men. As part of that plan, Fox agreed in January to a new $4-billion, eight-year contract to broadcast National Football League games. News Corp. also plans to buy the British soccer team Manchester United for $1 billion, the most expensive sports franchise transaction ever.

Fox Entertainment consists of 22 TV stations, the Fox network, the 20th Century Fox film studio, cable networks such as Fox News Channel and other assets.

The Fox TV network is No. 4 in prime time. Fox News Channel has been expanding its distribution and now reaches 35 million homes.

Twentieth Century Fox raked in the third-largest share of the U.S. box office so far this year, behind Viacom Inc.'s Paramount and Walt Disney Co.'s Buena Vista.

News Corp.'s shares are expected to climb now that investors have placed a value on Fox assets of $15.1 billion, or $18 billion including debt. Based on expected earnings, Fox is valued at about 25% more than Viacom and Disney.

News Corp. shares rose 50 cents to close at $28.38 on the NYSE on Wednesday.

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