--News Corp. to split into two companies
--Rupert Murdoch to be chairman of both, CEO of entertainment
company
--News Corp. plans to assemble new management teams in months
ahead
(Updates to add details from conference call throughout.)
By William Launder and John Jannarone
News Corp. (NWS, NWSA) said it will separate its publishing
business from its film and television divisions in a move that
splits some of the world's biggest media brands into two distinct
public companies.
One company will house entertainment businesses including 20th
Century Fox, Fox broadcast network and Fox News Channel, while the
other will contain publishing assets, which include The Wall Street
Journal and the Times of London along with HarperCollins book
publishing and News Corp.'s education business.
News Corp. owns Dow Jones & Co., the publisher of this
newswire and The Wall Street Journal.
Chairman and Chief Executive Rupert Murdoch said the split was
the culmination of a three-year review process that would create
two "best in class" companies that can be better and more easily
managed separately, during a conference call with analysts.
Mr. Murdoch, who began building his media empire more than half
a century ago with one newspaper, further hinted that the move to
split was an emotional one. "Its a very big decision for me."
Mr. Murdoch will become chairman and CEO of the entertainment
and media business, while the company's current Chief Operating
Officer Chase Carey will have the same title at the entertainment
and media company. News Corp. didn't specify who will be in charge
of the publishing company.
"Over the next several months, the company will assemble
management teams and boards of directors for both businesses," News
Corp. said in a statement.
Also absent from the announcement were details on how News Corp.
plans to split its roughly $15.2 billion in long-term debt and
$10.7 billion in cash and cash equivalents between the two
entities. Mr. Murdoch told analysts that the publishing division
would be endowed with a "robust" cash position to help it make
investments and grow.
In a memo to News Corp. staff, Mr. Murdoch encouraged employees
to be resilient about the company's latest efforts to grow both
companies.
"Over the years, I have become accustomed to the noise of
critics and naysayers...and pretty thick-skinned," Mr. Murdoch
said.
The move culminates years of pressure on Mr. Murdoch from
investors, who have seen News Corp.'s slower-growing publishing
unit as a drag on earnings at the lucrative cable television and
film division. The decision also comes almost a year after broader
revelations of a phone-hacking scandal at News Corp.'s U.K. tabloid
division, which has damaged the company's newspaper business
there.
He dismissed suggestions that the decision to split was a
response to the phone-hacking scandal. The decision "is not a
reaction to anything in Britian," Mr. Murdoch said.
"There is much work to be done, but our board and I believe that
this new corporate structure we are pursuing would accelerate News
Corp.'s businesses to grow to new heights, and enable each company
and its divisions to recognize their full potential--and unlock
even greater long-term shareholder value," Mr. Murdoch said.
News Corp.'s board approved the split, in principle, at a
meeting in New York Wednesday evening that lasted roughly an hour
and a half, a person familiar with the matter said. Mr. Murdoch
spoke at the meeting and financial advisers made presentations to
the board.
Shares jumped 11% over Tuesday and Wednesday amid reports of the
split. In early trading Thursday, News Corp.'s Class A shares slid
1.6% to $21.96.
Under the initial plan, News Corp. shareholders will receive one
share in the new company for each same class share currently held.
But News Corp. plans to reconsider the exact ratio as the split up
process develops.
Both companies will maintain two classes of stock. Mr. Murdoch's
family, which now owns a roughly 40% voting stake, is expected to
maintain effective control of the two companies.
The separation is expected to be completed in 12 months. Once
the company gets final approval from the board, it will hold a
special shareholder meeting to vote on the plan. That meeting is
expected to take place in the first half of next year. The company
will also need regulatory approval to ensure the tax-free nature of
the transaction.
Mr. Carey said there would still be opportunities for the
separated companies to work together "at arms length" following the
split.
News Corp.'s entertainment assets make up by far the bulk of the
company, contributing three-quarters of the $25.34 billion in
revenue for the first nine months of the fiscal year, and have
benefited recently from the company's growing cable businesses. By
contrast, the publishing division has been slower to grow due in
part to changing media consumption habits for books and newspapers,
and more recently, because of costs tied to the U.K. scandal.
"Our publishing businesses are greatly undervalued by the
skeptics," Mr. Murdoch said in the memo to staff. "Through this
transformation we will unleash their real potential and be able to
better articulate the true value they hold for shareholders."
Write to William Launder at william.launder@dowjones.com
--Melodie Warner contributed to this article