News Corp mulls media, entertainment unit split

Rupert Murdoch's News Corp said Tuesday it was considering a "restructuring" that would split off its larger entertainment division from struggling publishing businesses.

The New York-based company confirmed reports earlier in the day and said the move would "separate its business into two distinct publicly traded companies."

The statement followed a report in The Wall Street Journal, one of the units of the global media-entertainment conglomerate, on the possible move.

News Corp shares jumped 8.3 percent in New York to close at $21.96 on the news.

Analysts said the move would separate the profitable film and television businesses from the news and media operations tainted by the phone-hacking scandal in Britain.

The carve-out would likely lead to one unit including 20th Century Fox movie studios, the Fox broadcast network and Fox News Channel, competing more directly against Disney, Time Warner and Comcast, which controls NBC Universal.

The company's publishing assets include The Wall Street Journal, New York Post, The Times of London and The Australian newspaper, as well as the HarperCollins book publishing house.

The Wall Street Journal report said the plan, if implemented, was not expected to change the Murdoch clan's effective control of any of the businesses, exercised through the family's roughly 40 percent voting stake in News Corp.

The possible restructuring follows the phone-hacking scandal in Britain that resulted in the closure of the company's flagship News of the World tabloid and the resignation of several senior executives.

In March, company president Chase Carey, seen as Murdoch's likely successor, acknowledged that some shareholders had talked to the company about spinning off the newspaper arm, but said it was "not a path we are pursuing."

Analyst Anthony DiClemente at Barclays said the publishing arm accounts for just seven percent of the value of the company and that a split could be positive.

"In our view, a spin-off would reduce the holding company discount in the stock and would allow investors to own a higher growth business without the slower growth publishing business and its associated liabilities," he said in a research note.

But he added that it was "unclear if spinning off the publishing business would ring-fence liabilities associated with the ongoing hacking investigation" or allow the group to carry out its plan for a full takeover of satellite broadcaster BSkyB, in which News Corp has a 39 percent stake.

"It could make it easier for News Corp to try and acquire the public (BSkyB) stake at a later date (but) we think common controlled ownership of both entities by the Murdoch family will remain an obstacle," the analyst said.

David Joyce at Miller Tabak said that the spinoff could take a year, but that it "would help Chase Carey focus on the entertainment assets and not be distracted by the lingering phone hacking scandal in the UK."

The New York Times reported the spinoff announcement may come as soon as this week, and that editors and publishers of the various units were attending a meeting in New York Tuesday to discuss the move.

The report said the new company may include The Wall Street Journal, The Times of London, The New York Post and dozens of other newspapers.

The Wall Street Journal said the matter could go to the News Corp board on Wednesday and that an announcement could be as early as Thursday. It said the Australian-born Murdoch and his family would keep control of both groups.

In the most recent quarter ended March 31, News Corp profit was up 47 percent to $937 million, as revenues rose two percent to $8.4 billion.

Cable operations and entertainment accounted for much of the profit.

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