--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
(Adds further details and updates share price in the seventh,
10th, and 14th paragraphs.)
By William Launder and John Jannarone
News Corp. (NWS, NWSA, NWS.AU) said it will separate its
publishing business from its film and television divisions in a
move that will split 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 during a
conference call with analysts 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.
Mr. Murdoch, who began building his media empire more than a
half-century ago with one newspaper, further hinted the move to
split the company was an emotional one. "It's a very big move and
big decision for me."
Mr. Murdoch will become chairman and CEO of the
entertainment-and-media business, while Chase Carey, News Corp.'s
chief operating officer, will retain his title at the
entertainment-and-media company.
News Corp. didn't specify who will be in charge of the
publishing company, but Mr. Murdoch said he would likely pick an
internal candidate. He said his oldest son, Lachlan, is unlikely to
take the role, as some observers have speculated in recent
days.
Mr. Murdoch told CNBC the reputation of his son James hadn't
been ruined by the phone-hacking scandal at News Corp.'s U.K.
tabloid division. The CEO stopped short of suggesting one of his
children would become the heir to his businesses, saying they would
"have to earn it" and "want it."
News Corp. plans to put together management teams for both
companies over the next several months. Mr. Murdoch promised to be
a "pretty active" chairman at the publishing business.
Although News Corp. didn't offer specific details on how it
would split its roughly $15.2 billion in long-term debt and $10.7
billion in cash and cash equivalents, Mr. Murdoch promised the
publishing division would be endowed with a "robust" cash position,
while the entertainment business would be saddled with more
debt.
He also conceded shares of the publishing company would
"clearly" trade at a lower price-to-earnings multiple following the
split.
The split culminates years of pressure on Mr. Murdoch from
investors, who have viewed 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.
Mr. Murdoch dismissed suggestions the decision to split was a
response to the phone-hacking scandal. The decision "is not a
reaction to anything in Britain," he said.
Shares jumped 11% over Tuesday and Wednesday following reports
of the split. In Thursday trading, News Corp.'s Class A shares slid
1.2% to $22.05.
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.
Under the plan announced Thursday, 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.
Each of the two companies will maintain two classes of stock.
Mr. Murdoch's family, which 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
also will need regulatory approval to ensure the tax-free nature of
the transaction. Mr. Murdoch said he hoped News Corp. would have
most of the fallout from the phone-hacking scandal behind it by
that time.
He also said News Corp. wouldn't try to increase its stake in
British Sky Broadcasting Group PLC (BSYBY, BSY.LN), in which it
owns a stake of around 39%. News Corp. was forced to drop its
efforts to buy the rest of the British pay-TV operator last year as
the phone-hacking scandal intensified.
Messrs. Murdoch and Carey said the company hadn't been properly
valued by investors--a concern the split will, in part, address.
The companies still will have opportunities to work together "at
arm's length" after the split, Mr. Carey said.
Write to William Launder at william.launder@dowjones.com.