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Murdoch's Heir Apparent Abruptly Resigns His Post

The departure of the mogul's elder son raises succession questions at Fox parent News Corp.

July 30, 2005|Sallie Hofmeister | Times Staff Writer

Relinquishing his status as heir apparent in one of the world's most powerful media dynasties, Rupert Murdoch's elder son abruptly resigned as deputy chief operating officer of News Corp. on Friday, raising questions about who will eventually take the reins of the family-controlled conglomerate.

The departure of the 33-year-old Lachlan Murdoch, who was being groomed to succeed his father, appears to signal the ascendancy of Murdoch's younger son, James, 32, who runs News Corp.'s British satellite operations.

Were he eventually to replace his 74-year-old father as chief executive, James Murdoch would preside over a global empire that includes the Fox TV network, the Fox News Channel, the New York Post, the 20th Century Fox movie studio and satellite TV operations such as DirecTV that reach all corners of the world.

In the near term, Lachlan Murdoch's departure solidifies the power of Peter Chernin, News Corp.'s president and chief operating officer. Although Rupert Murdoch has said he has no plans to retire, some analysts believe that his well-regarded No. 2 could play a key role when the patriarch steps aside.

It was unclear Friday what caused Lachlan Murdoch to quit his executive positions, which include serving as publisher of the New York Post and overseeing the company's TV stations and Australian newspaper group.

According to several sources close to the family, tensions between father and son had intensified in recent months over a number of issues, including Lachlan Murdoch's opposition to the company's recent relocation to New York from Sydney and his frequent absences from the office.

Although Rupert Murdoch rarely if ever takes a vacation, Lachlan Murdoch took 10 weeks off last year to go mountain climbing and sail his yacht, one News Corp. source said. During that time, he drew a salary of $1.8 million and a bonus of $2.34 million.

Since the birth of his son, Kalan, in November, Lachlan Murdoch has spent weeks at a time in Australia, where he and his wife, former model Sarah O'Hare, have their primary residence, another company insider said.

Sources close to the family said Lachlan Murdoch also crossed swords with his father over a family trust that holds News Corp. shares. Rupert Murdoch's 1999 divorce settlement with his second wife, Anna, is believed to include a stipulation for assets to be held in trust for their three children -- Lachlan, James and older sister Elisabeth -- and Murdoch's daughter from a previous marriage, Prudence.

Sources said Murdoch's third wife, Wendi Deng, a former executive with News Corp.'s Star TV whom Murdoch married just days after his divorce from Anna became final, has been pushing her husband to change the trust. Deng, 36, wants their two young children, Grace and Chloe, to share in the spoils -- a proposal that Lachlan Murdoch has opposed, sources said.

But some close to the family speculated that Lachlan Murdoch's reasons for leaving were less about specific grievances than about self-determination.

"Lachlan earned his stature in the company," said Leo Hindery, a former cable executive who knows the Murdochs. "He came to the conclusion that he wanted to live his own life, not his father's."

Lachlan Murdoch's resignation is effective Aug. 31. He will remain on the News Corp. board.

"I look forward to returning home to Australia," he said in a statement in which he thanked his father "for all he has taught me in business and in life. It is now time for me to apply those lessons to the next phase of my career."

In the same statement, Rupert Murdoch said he was "saddened" by his son's decision, adding that he "respected the professionalism and integrity that he has exhibited throughout his career."

On Friday, Rupert, Lachlan and James Murdoch were unavailable for interviews. Chernin was also unavailable.

News Corp. spokesman Gary Ginsberg said Lachlan Murdoch's departure did not change the company's succession plan. "The reality is that Rupert is going to stick around as long as he's physically and mentally capable, and when he isn't, the board will make a decision," he said.

Friday's upheaval comes as cable mogul John Malone's growing stake in News Corp. has put some investors on edge. Last fall, News Corp. adopted a defensive "poison pill" measure to ward off the advances of Malone's Liberty Media Corp., which had unexpectedly doubled its voting stake in News Corp. to about 18%.

The Murdoch family controls 30% of News Corp.

Malone has since said he has no intention of making a run at News Corp. but was merely taking advantage of the bargain price of News Corp. shares in the wake of their shift from the Australian market to the New York Stock Exchange.

Yet talks between Malone and Rupert Murdoch about reducing Liberty's stake in News Corp. have stalled, making investors wary.

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