News Corporation's potential split into two separate businesses -- one for its
publishing efforts, and the other for its entertainment portfolio -- is being
hailed as a positive step by analysts even as the company remains mum on its
final decision.
In a statement issued yesterday, the mass media corporation confirmed it
is considering a restructuring to separate its business into "two distinct
publicly traded companies." The company's board of directors reportedly met to
discuss the plan today and could announce its approval tomorrow morning.
A News Corp. [NWS] spokesman declined to comment.
The spin-off news sent stock prices up to a high of $22.73 a share
earlier today, a more than 4 percent increased from its closing price of
$21.76 yesterday.
"While the decision has not been finalized, we see this development as
another significant positive step to an already strong News Corp. story," said
Nomura analyst Michael Nathanson in a report. "Ironically, we believe last
year's failed bid to acquire its remaining BSkyB stake has proved to be an
unexpected defining moment."
Nathanson added since the failed takeover bid, News Corp., whose U.S.
holdings include Fox News, The Wall Street Journal and Twentieth Century Fox,
"has taken clear steps toward a more shareholder-friendly strategy that to
older investors in the company was once thought of as a pipe dream" by
authorizing $10 billion of share repurchases, and making multiple moves to
"clean up" such unconsolidated assets as ESPN Star Sports and Consolidated
Media Holdings.
In his report, Nathanson said the company would stand to generate more
than $25 billion in revenues this year from its television, filmed
entertainment, cable networks and direct broadcast satellite television
sectors, with that number rising to more than $26 billion in 2013, and more
than $28 billion in 2014. Revenues from News Corp.'s newspapers, magazines and
book publishing sectors would hover around the $9 billion range for all three
years.
The company could stand to make nearly $3.6 billion in income in 2013
from its entertainment ventures, while net income from its publishing ventures
would drop to $323 million.
The company said its total assets as of March 31 were $61 billion, with
$34 billion in total annual revenues.
Under the proposal, company founder, chairman and CEO Rupert Murdoch, 81,
would control both companies.
In another report, Barclays Capital analyst Anthony DiClemente said it
was unclear if spinning off the publishing business would "ring-fence
liabilities" associated with an ongoing phone-hacking scandal and Ofcom's
review of News Corp.'s 39 percent stage in BSkyB.
"While in theory, if the Sky stake is retained with the entertainment
assets, it could make it easier for News Corp. to try and acquire the public
stake at a later date, we think common controlled ownership of both entities
by the Murdoch family will remain an obstacle," DiClemente said, adding
company president and chief operating officer Chase Carey has appeared to gain
greater influence within the company.
Laura Martin, an analyst with Needham & Company, said the company split
could add $5 per share, bringing share price up to a target of $27.
"We upgraded the stock on the split because we think it adds so much
value to split this company up," she said.
Other units like classified advertising companies and other digital
assets such as Monster.com, which the company has considered buying, would be
part of the publishing division, The New York Times [NYT] reported.
A Monster spokeswoman declined to comment yet Martin said if any
acquisitions were to take place, they wouldn't happen until the split's
completion six to nine months in the future.
The Associated Press contributed to this report.
