News Corp. Confirms It's Considering Dividing Its Assets

Rupert Murdoch’s News Corp. has confirmed a report in its own newspaper, the Wall Street Journal, that it's considering dividing itself into two companies, separating its publishing division in order to focus on its much larger and more profitable entertainment arm. 

"News Corporation confirmed today that it is considering a restructuring to separate its business into two distinct publicly traded companies," was the comment in its one-sentence statement.

Top editors and publishers from the company’s newspapers gathered in New York (according to the New York Times) to discuss the proposal along with Murdoch, his son James Murdoch, Chase Carey, COO, and Joel I. Klein, CEO of News Corporation’s education division and a trusted adviser.

The FOX movie studio and television networks are the most profitable parts of Murdoch empire and a split would safeguard those entities against continuing fallout from the phone hacking scandal that rocked News Corp., led to the demise of the News of the World, disrupted Murdoch’s BSkyB takeover bid and led to several high profile arrests.

A corporate spinoff could establish a publishing business including WSJ, The Times of London, The New York Post and the HarperCollins book business. “We’ve gone from lemons to lemonade,” commented Barton Crockett, Lazard Capital Management analyst. “I think it’s something that will make News Corp. a stronger business and a better stock.”

Other analysts, including Gamco Investors portfolio manager Lawrence Haverty, view the proposal as a positive move, one that would address media plurality concerns in the UK. “The timing is because of the Olympics,” surmised Thomas Eagan, a media analyst at Canaccord Genuity Securities. “They’re looking at ways to help Ofcom make a decision that is favorable to News Corporation.”  

The Wall Street Journal, which broke the news, reports that the Murdoch family is not likely to cede control of any of the businesses involved and would maintain its 40% percent voting stake, with current management remaining and Sir Rupert serving as chairman of both companies.

Meanwhile, back in Britain, the scandal and inquiry over alleged hacking continues, sparking speculation that this has been a key factor in changing Murdoch’s initial opposition to the split, long supported by investors and high-level News Corp. executives.

British regulatory agency Ofcom is preparing a report on whether News Corporation is “fit and proper” to control 39% of satellite broadcaster British Sky Broadcasting before the Olympics begin on July 27 and a newspaper spin-off could affect that decision.