Business View: Sons and lovers, poison pills and the Rupert succession

The great media mogul is 75 next birthday. Could his empire be worth more if he was not there?

In between trading flats and snapping up internet companies, it must feel like the late 1990s chez Murdoch. Favoured son James is said to be planning to get his BSkyB to buy One-Tel, a company where his now out- of-favour brother, Lachlan, lost a lot of money for investors, including daddy.

There's no doubt that Rupert is one of the greatest business leaders of our age - a fearless, visionary creator of opportunities and wealth. But concern is growing in the investment community about the future of his News Corporation media empire. Rupert will be 75 next birthday and, although he is still eight years younger that Viacom boss Sumner Redstone, talk inevitably turns to succession. Will it be James Murdoch? Will it be Peter Chernin? Will it even be Wendi Murdoch?

Whoever it is will have to deal with what is increasingly becoming a "Murdoch discount". News Corp shares trade at around 15 per cent less than the likes of Time Warner or Walt Disney. BSkyB, one of the sustainable growth stories of British media, trades skittishly, with the market willing to punish it for the most minor indiscretion.

Investors and analysts have a menu of gripes about Rupert's empire. The current topic is the way in which the Murdoch family controls News Corp, and BSkyB, via large minority positions. In News Corp, a stake of just under 30 per cent is used to run the company like a private fiefdom. When cable king John Malone bought 18 per cent, the reaction was to try to force him to restrict his voting rights by threatening to use a poison pill to dilute his stake. Investors have reacted badly to this, suing to stop the pill. Being in litigation with your investors is unlikely to give you a good share rating.

At BSkyB, James is keen on buying in some shares. But investors point out that News Corp already owns 37 per cent of the stock and, as it is not planning to sell any of its shares, this would increase its iron grip.

Another gripe is nepotism. James is a talented guy, but would he be where he is without his father's influence? And does BSkyB have to award James a pay package at the top reaches of what executives receive in the UK? And would Lachlan have risen to chief operating officer of News Corp without help from his dad? And did he deserve a multi-million-dollar payoff when he resigned for personal reasons? The prospect of either son succeeding Rupert has had investors concerned for some time. This market is uncomfortable with companies run as family businesses.

A third issue is complexity. BSkyB and DirecTV are among a slew of businesses controlled through minority investments. Many subsidiaries are registered in offshore centres for tax reasons. News Corp accounts, to be fair, are scrupulously presented. But investors fear that when Rupert dies, it will be hard to unpick the empire he created.

Predictions that we are in the twilight of the Rupert Murdoch era have been so often proved wrong that I fear to call it again. This great mogul cannot go on for ever, though. But will his empire be worth more without him?

Gerry needs a Compass

By noon tomorrow, Sir Gerry Robinson will have to say whether he is mounting a bid for Rentokil Initial. Of course, he'll say no. But will he come clean about what he is doing? All investors have had so far is a presentation that says Sir Gerry's Raphoe Management wants a valuable stake in the company to allow him to be executive chairman - but nothing concrete about what he would do once installed.

If Sir Gerry and his supporter, 14.75 per cent shareholder Franklin Templeton, were to call a shareholder meeting on this basis, they would have no chance of unseating Rentokil's chief executive, Doug Flynn. But lovely though Sir Gerry is, I don't think he has much more substance to offer.

He should give up and assault something closer to home - like Compass Group.

j.nisse@independent.co.uk