A Tale of Two Offerings

Article excerpt

SLOAN is NEWSWEEK'S Wall Street editor. His e-mail address is sloan@panix.com.

Fox and the government's uranium plants are both selling stock. Which one's the better deal?

OK, FANS, THE FOURTH OF JULY HAS just passed and some of us still have 33 our minds in holiday mode. So instead of dealing with complex stuff, let's have a simple quiz. The question: what do Rupert Murdoch's Fox entertainment empire and the federal government's uranium-enrichment plants have in common? No, the answer isn't that both sometimes produce toxic waste. And the answer doesn't involve Homer Simpson, the Fox cartoon character who works at a nuclear plant powered by uranium. Give up? OK Fox and the U.S. Enrichment Corp. both announced plans last week to sell stock to investors in initial public offerings.

When you see the market-savvy Murdoch and the usually clueless Uncle Sam doing the same thing at the same time, you have a great chance to compare and contrast, as they put it in the essay portion of your high-school English exam.

For starters, you can see Murdoch is by far the shrewder about markets. He's giving Wall Street what it likes-an entertainment "pure play"- while the government is peddling what the market doesn't want: a low-growth vendor to the nuclear power industry, a slow-growth or no-growth market. But the sexier investment isn't necessarily the better one.

Let me explain. Murdoch is making Fox a separate company to highlight its value and thus boost the share price of its owner, News Corp. Fox will include the Fox TV stations, network, movie studio, programming interests and sports teams. Murdoch will sell a 20 percent stake in the new company which experts value at $15 billion to $20 billion as a whole. You can be sure that when Fox documents are filed at the Securities and Exchange Commission, we'll see that the proposed price is a stratospheric multiple of Fox's profits. And if there's a cash dividend, it will be microscopic. Who bothers with boring things like profits and dividends when you can buy into concepts like "content" and "branding"?

By contrast, the U.S. Enrichment Corp.-a federal corporation whose "privatization" has been inching along since the Reagan administration- doesn't seem to have a clue how to make itself look sexy to investors. For starters, you would think the name "Enrichment" would stay in the company's name, if only because enrichment is what stock buyers dream of. …