News Corp may split itself into two firms

The News Corporation is considering dividing itself into two companies, cleaving its publishing arm from its far larger entertainment division, a person briefed on the matter told DealBook early on Tuesday.

If News Corporation follows through, it would essentially mean splitting off the newspaper business that once formed the heart of the company from the Fox movie studio and television networks that now represent the strongest and most profitable parts of Rupert Murdoch’s media empire.

Such a split, which may take the form of a corporate spinoff, would create a publishing business that included The Wall Street Journal, The Times of London, The New York Post and the HarperCollins book-publishing business.

The Murdoch family would likely retain control of the newly split companies under such a scenario, this person said.

It isn’t yet clear if Murdoch will proceed with the move — something he had rejected in the past — though he has softened his opposition more recently. Should the company settle on this path, it could announce its intentions to pursue a split as soon as this week, the person said.

A News Corporation spokeswoman, Julie Henderson, declined to comment.

News Corporation’s chief operating officer, Chase Carey, said publicly earlier this year that the company’s management team had considered a split. But at the time, he said, no decision had been made.

Such a move would come amid the ongoing investigations into alleged hacking by News Corporation’s British newspapers, a damaging scandal that led to the shuttering of the News of the World and undermined the company’s $12 billion bid for the portion of British Sky Broadcasting that it did not already own.

The fallout from the hacking scandal has grown over the past year to touch upon an array of figures, including British Prime Minister David Cameron and Murdoch’s son, James, who led the company’s British newspaper operations. The country’s broadcast regulator has been reviewing News Corporation’s status as a “fit and proper” owner of television stations in Britain.

But the person briefed on the matter said that a split was more closely tied to attempts to improve shareholder value. Many restive shareholders have long preferred that the company focus on its more lucrative entertainment assets, which together generated $23.5 billion in revenue in the year ended in June 2011. The publishing business, by contrast, contributed $8.8 billion in revenue.

News Corporation’s shares have risen 20 per cent over the past 12 months, but some of that ballast has been supplied by an expensive buyback program. The company’s stock fell 1.4 per cent on Monday, to $20.08.

The company’s deliberations were first reported by The Wall Street Journal.

 

© 2012 The New York Times News Service