News Corp board agrees to split
For years some investorshave have wanted to spin out the publishing business
By CFOWorld staff | CFO UK | Published 13:30, 28 June 12
The board of Rupert Murdoch’s News Corp has agreed to create two publicly traded companies out of the $60 billion media giant after investor pressure grew to hive off the newspaper business, the company confirmed on Thursday.
News Corp's board, overseen by 81-year-old chairman Murdoch, met on Wednesday to reach agreemetn on the decision to create two separate companies, the source said.
Ever unpredictable, Murdoch, after years of resisting calls by some large shareholders to spin out or sell off the company's slow-growth - and in some cases, loss-making - newspapers, decided to propose the move rather suddenly.
Details on the management structure are still to be resolved and formal approval by the board is still needed. The process is expected to take about a year.
Pressure on News Corp to get rid of the newspaper business was ramped up after the phone hacking scandal tainted its British titles forcing it to close 168-year old News of the World tabloid and drop its proposed acquisition of pay-TV group BSkyB.
The Wall Street Journal, owned by News Corp, earlier said one company will hold the entertainment businesses like 20th Century Fox, Fox broadcast network and Fox News Channel, while the other will hold the publishing assets, which include The Times, The Australian, and HarperCollins book publishing.
According to people familiar with the matter, News Corp has already enlisted investment banks JP Morgan, Goldman Sachs and Centerview to advise on a process.
It was not immediately clear if it will be put to a shareholder vote. If it is, Murdoch controls just under 40 percent of the vote and would likely have no problem getting the extra 10 percent needed.
The process of separating the company's broadcast, cable and film assets from its publishing and education operations stands to be complicated by issues such as regulatory and tax implications and could take up to a year to complete.
The film and television businesses generated revenues of $23.5 billion in the year to June 2011, dwarfing the publishing unit's $8.8 billion.
Publishing accounts for around 7 percent of News Corp's value, according to analysts at Barclays Capital. It estimates that publishing represents 24 percent of revenues and around 11 percent of operating income.
Analysts estimate an independent publishing division would generate about $1.3 billion in EBITDA at a multiple valuation of six times, or $3.25 per share.
They expect a standalone entertainment unit to be valued at $52 billion, or $23 per share, based on an eight times cash flow multiple.
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