Board approves split of News Corp
The board of directors at Rupert Murdoch’s News Corp has approved a plan that calls for splitting its newspaper business and entertainment operations into two separate companies.
The statement said the company intends to pursue the separation of its publishing and media and entertainment businesses "into two distinct publicly traded companies".
The company's board authorised management to explore this separation after a board meeting yesterday.
The statement said the move will create a publishing company, comprised of News Corporation's newspapers and information businesses in the US, UK, and Australia, the Company's leading book publishing brands, its integrated marketing services company, its digital education group, as well as its other assets in Australia.
It will also create a global media and entertainment company, which would encompass News Corporation's broadcast and worldwide cable networks, film and television production studios, television stations and pay-TV businesses in Europe and India.
"There is much work to be done, but our Board and I believe that this new corporate structure we are pursuing would accelerate News Corporation's businesses to grow to new heights, and enable each company and its divisions to recognize their full potential – and unlock even greater long-term shareholder value," said Rupert Murdoch, chairman and CEO of News Corporation.
Mr Murdoch said the move would simplify operations and greater align strategic priorities. This, he said, would enable each company to "better deliver" on commitments to consumers across the globe.
"I am 100 per cent committed to the future of both the publishing and media and entertainment businesses and, if the Board ultimately approves a separation, I would serve as Chairman of both companies," he said.
The move will see the group’s 39 per cent stake in broadcasting giant BSkyB separately listed from the embattled UK newspaper arm News International, which has been the focus of the phone hacking scandal that led to the closure of News Corp’s News of the World tabloid paper.
The move will see News Corp’s film and television businesses — including 20th Century Fox and the Fox broadcasting network — grouped in one company.
The other company would hold all News Corp’s publishing interests, such as The Wall Street Journal, The Times, The Sun, The Australian, The New York Post and publisher HarperCollins.
The entertainment arm would be by far the bigger operation, with the publishing division hindered in recent years by tough media market conditions and costs related to the UK phone hacking scandal.
It will consist of News Corporation's highly-profitable cable and television assets, filmed entertainment, and direct satellite broadcasting businesses, including Fox Broadcasting, Twentieth Century Fox Film, Twentieth Century Fox Television,National Geographic Channels, BSkyB, Sky Italia and Sky Deutschland, among others.
News Corp was rocked by the hacking debacle, with Rupert Murdoch and his son James Murdoch coming under heavy fire.
A report by a committee of MPs claimed Rupert Murdoch was “not a fit person” to run an international company following an inquiry by the Commons Culture Committee investigating the News of the World scandal.
News Corp has been trying to contain the scandal from infecting the rest of the group.
James Murdoch resigned as chairman of BSkyB in April admitting he had become its “lightning rod”, just weeks after he quit as boss of News International.
Under the deal, the company's shareholders would receive one share of common stock in the new company for each same class News Corporation share currently held.
Following the separation, each company would maintain two classes of common stock: class 'A' common and class 'B' common voting shares.
Rupert Murdoch will serve as chairman of both companies and CEO of the media and entertainment company, once the transaction is complete.
The company said it was still working on the finer details of the division but said the move should be complete in "approximately" 12 months.
Once the plan has received final board approval, the company will hold a special shareholder meeting to consider the transaction.
This meeting is not expected to take place until the first half of 2013.
Since the collapse of its bid to take over BSkyB, News Corp has implemented a share buyback program totaling $10 billion. Chief financial officer Dave Devoe said the program will not be affected by the separation. Shares have risen more than 43 per cent since the program was implemented last July.
News Corp shares were down 1.4 per cent to $22 on Nasdaq.
"This is very shareholder friendly, News Corp is very complex stock," said Larry Haverty, portfolio manager at Gabelli Multimedia Funds, which owns News Corp stock.
He said the stock will benefit from a reduction in the so-called 'Murdoch discount," which referred to Murdoch's reluctance to take any notice of shareholders desires.
Additional reporting: Agencies