News Corp board approves company split
UPDATED @ 10:55:05 AM 28-06-2012
NEW YORK, June 28 — The board of News Corp approved in principle splitting the US$60 billion (RM180 billion) media conglomerate into separate publishing and entertainment businesses, the Wall Street Journal reported on its website, citing a person familiar with the situation.
News Corp’s board, overseen by chairman Rupert Murdoch, met yesterday and an announcement was expected today on the decision to create two publicly traded companies.
Ever unpredictable, Murdoch, after years of resisting calls by some large shareholders to spin out or sell off the company’s slow-growth — and in some cases, loss-making — newspapers, decided to propose the move rather suddenly. Pressure on News Corp to get rid of the newspapers business was ramped up after a phone hacking scandal tainted its British titles and forced the company to drop its proposed acquisition of pay-TV group BSkyB .
“As recently as a month ago he was still saying no way would he do this,” said one News Corp insider with knowledge of the internal conversations.
The Wall Street Journal, owned by News Corp, said one company will hold the entertainment businesses like 20th Century Fox, Fox broadcast network and Fox News Channel, while the other will hold the publishing assets, which include The Times, The Australian, and HarperCollins book publishing.
In a brief statement on Tuesday, News Corp said only that it was “considering” splitting the company. According to people familiar with the matter, News Corp has already enlisted investment banks JP Morgan, Goldman Sachs and Centerview to advise on a process.
Yesterday’s board meeting lasted about an hour and a half and many details, such as who will run the publishing business, have yet to be resolved, the Wall Street Journal said.
A spokesman for News Corp’s Australian arm was not immediately available to comment on whether the split had been approved.
The board, long criticized for being dominated by the Murdochs or beholden to them, had been expected to approve the split. It was not immediately clear if it will be put to a shareholder vote. Even if it is, Murdoch controls just under 40 per cent of the vote and would likely have no problem getting the extra 10 per cent needed.
Given that, Wall Street and others saw Wednesday’s meeting as little more than a formality.
“It sounds pretty well along,” said Canaccord Genuity Inc analyst Thomas Eagan.
The process of separating the company’s broadcast, cable and film assets from its publishing and education operations stands to be complicated by issues such as regulatory and tax implications and could take up to a year to complete.
The most speculation revolves around how Murdoch handles the reassigning of his top executives, including his three adult children associated with the company.
With the company predicted to be split between its struggling publishing business and its much larger, faster-growing entertainment business, the majority of the big names are anticipated to jockey for key roles on the entertainment side.
Chase Carey, News Corp’s current No. 2, is widely seen as the likely CEO designate for the entertainment business. Liz Murdoch and James Murdoch are expected to report to him. That could raise questions about the current heads of the Fox TV business, Peter Rice and Kevin Reilly.
Less clear is who would run the publishing business. One obvious candidate is Joel Klein, the former New York City chancellor for education, who joined News Corp last year to run its new education business, which so far consists only of Wireless Generation, a digital company for schools. Murdoch’s eldest son, Lachlan, a former New York Post publisher and currently a director, is another prospect.
Canaccord’s Eagan believes News Corp stock has room to rise even with an 11 per cent gain since news of the split plans broke on Tuesday. “News Corp is still trading below its peers at 6.5 times EBITDA, even after you take out the publishing business and the expected litigation costs,” he said.
News Corp’s Australian-listed shares jumped more than 3 per cent to a 4-year high of A$22.29 today. — Reuters