News Column

News Corp. Split Hailed, Could Lead to Bid for Monster

June 28, 2012

Ira Kantor

Rupert Murdoch

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, 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.

Source: (c)2012 Boston Herald

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