Wall Street Reacts to James Murdoch Ascending the Throne

New CEO could bring international and tech experience to role
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It is not clear to Wall Street how much 21st Century Fox would change if James Murdoch replaces his father, Rupert Murdoch, as CEO.

Reports Thursday indicated that the media giant’s board would be addressing the issue of succession at its next meeting and that the plan being proposed would make James CEO with Rupert remaining as chairman.

In the process, Chase Carey would be stepping down as the company COO.

David Bank of RBC Capital, said the idea of James Murdoch becoming CEO of the company wouldn’t be that much of a surprise because of his promotion to co-COO in 2014.

Since then, “James Murdoch has been an integral part of the executive decision making team at [21st Century Fox] for years,” Bank said in a research note. What James has said has been consistent with how the company has been describing its strategy to Wall Street.

“While James Murdoch may have less experience dealing directly with the Domestic Distribution ecosystem than Chase Carey, his International exposure is a real strength and his view of the emerging landscape of global distribution (and AdTech) should be key to navigating changes in the emerging global distribution and advertising ecosystems over the next decade,” Bank said. “Additionally, with Rupert Murdoch remaining as 'executive chairman,' we'd also expect some consistency with historical operating philosophy. As one Industry source indicated to us, the Board at Fox 'matters' from an operating perspective.”

Bank said that management changes, including the departure of Carey, could create an expectation of an increase in merger and acquisition activity. Indeed, Bank notes, there are a number of media companies that could come into play, including those controlled by 92-year-old Sumner Redstone.

“We would imagine that Fox would continue to approach M&A in a disciplined fashion with or without Chase Carey in the operating executive suite,” said Bank, noting that both Carey and James Murdoch were involved in the bid for Time Warner last year.

Michael Nathanson of MoffettNathanson Research, lamented the departure of Carey. Nathanson expects Fox to have lower earnings than its guidance to Wall Street indicates, but wonders whether James Murdoch favors providing any new guidance at all, based on his comments on past earnings calls.

As for how James Murdoch might run the company differently than his father, Nathanson had no opinion. “We have no idea what to assume.  Anyone who says anything different is making it up."

21st Century Fox shares were little changed on Thursday.

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