Eighty-two-year-old billionaire and media mogul Rupert Murdoch is set to
divide his media company, News Corp., in two, with one company managing
all the publishing assets (which include Harper Collins, the
Wall Street Journal, and the
New York Post), and the other focusing on TV and film.
But that impending separation was overshadowed last Thursday by the announcement
of a more personal one: Murdoch filed in a New York Court for divorce
from his wife, Wendi, as a result of irretrievable marriage breakdown.
Wendi Deng Murdoch is Rupert’s third wife, and 38 years his junior.
A Yale MBA graduate originally from a factory town in China, Deng was
working for Murdoch’s company Star Television in Hong Kong when the
pair first met.
Insiders have recently suspected difficulties in the couple’s 14-year
marriage, but the divorce is still big news in the financial community,
where any indication of marriage settlements eating into the family business
empire is bound to set investors on edge.
Murdoch’s previous divorce, from his second wife, Anna, is notorious
for its rumored settlement of $1.7 billion, which included about $110
million in cash, plus properties and other assets. Despite the astronomical
sum (said to be the second-highest divorce settlement in history), things
could have gone far worse for Murdoch. The couple lived in California,
a state with a shared-property regime, and they did not have a pre-nup.
Anna could have claimed half his fortune, then valued at $7.8 billion.
Murdoch was more cautious this time around. When he married Deng in 1999
aboard his private yacht (just 17 days after his previous divorce was
finalized), she had already signed a pre-nup, and she later signed two
additional agreements, one following the birth of each of the couple’s
daughters. It is almost certain Murdoch would have protected News Corp.
and its new offshoot, 21st Century Fox, in the agreement. Both companies are currently to be controlled
by the Murdoch family trust, in which all six of his children hold shares
(though Grace and Chloe, his children with Wendi Deng, hold only non-voting shares).
How enforceable is a pre-nup? The answer depends on the jurisdiction. New
York is a state known to be “pre-nup friendly,” and the agreement
will likely be upheld, unless it is unconscionable. But the enforceability
of pre-nups or other domestic contracts, such as separation agreements,
can be a tricky issue.
If the couple were divorcing in Canada (where pre-nups are referred to
as “marriage contracts”), the fate of their contract would be
less certain. Canadian law regarding marriage contracts is currently in
a state of flux, and it is common for one spouse to apply to the court
to have their agreement set aside. If there were procedural problems at
the time the agreement was signed (for example, one person was pressured
to sign, didn’t have independent legal advice, or did not know what
they were giving up), the agreement might be set aside. The same is true
if the agreement is grossly unfair to one spouse at the time of signing,
or if it has unexpectedly become so by the time that one spouse applies
to have it set aside.
A large power imbalance between parties can lead to issues with the contract.
Deng, significantly younger than Murdoch and a junior employee at his
company at the time of marriage, could certainly meet those criteria.
(And Murdoch admits he had to persuade her to accept his proposal.) However,
Murdoch covered his bases here: Deng was represented at the time by Pamela
Sloan, an experienced lawyer who is now representing her in the divorce.
That makes it much harder for Deng to argue she didn’t know what she
was getting into. The subsequent signing of two additional agreements,
to take into account the birth of two daughters, also makes it less likely
that holes will be found in the pre-nup.
Wendi Deng probably won’t walk away empty-handed from her marriage
to a man Bloomberg lists as worth over $12 billion, but let’s hope
she and her lawyer were sharp negotiators back in 1999. She may not get
much more than whatever is in that pre-nup, plus her share of any property
the two own jointly-which includes a Beverley Hills home and a Manhattan
condo purchased in 2005 (for a whopping $44 million).