News Corp. is considering splitting into two companies, separating its publishing assets from its entertainment businesses. WSJ's Bruce Orwall reports. Photo: Getty Images
News Corp. said Tuesday that it is considering a restructuring to split into two publicly traded companies, separating its publishing assets from its entertainment businesses.
The company's stock jumped about 8% to $21.92 in early trading.
The split would carve off News Corp.'s film and television businesses, including 20th Century Fox film studio, Fox broadcast network and Fox News channel from its newspapers, book publishing assets and education businesses. News Corp.'s publishing assets include The Wall Street Journal, the Times of London and the Australian newspaper, as well as HarperCollins book publishing. If a separation occurs, the publishing company would be far smaller than the entertainment company.
A final decision on the split hasn't been made. News Corp. Chairman Rupert Murdoch has previously opposed such a move, which has been discussed internally for several years, say people familiar with the situation. Mr. Murdoch has recently warmed to the idea, said one person familiar with the situation.
The idea under consideration isn't expected to change the Murdoch family's effective control of any of the businesses, exercised through the family's roughly 40% voting stake in News Corp. The idea is similar to the split of Viacom Inc. into two companies in 2006, when CBS was carved off as a separate company. In that break up, Viacom's controlling shareholder Sumner Redstone ended up with control of both companies.
Consideration of the restructuring at News Corp. comes in the wake of the phone-hacking scandal at the company's British newspaper operations. That scandal has so far resulted in the closure of the News of the World tabloid and the resignation of several senior executives, and prompted News Corp. to abandon a bid for shares it doesn't already own in the U.K. satellite-TV operator British Sky Broadcasting PLC.
In light of the scandal, the U.K. communications regulator has been reviewing whether BSkyB, which is 39%-owned by News Corp., is a "fit and proper" holder of a broadcasting license. Mr. Murdoch's son James, who has been criticized for his handling of the phone-hacking affair, gave up his chairmanship of BSkyB but remains on the board.
A split of News Corp.'s businesses would be welcomed by outside investors who are more interested in News Corp.'s television and film assets than its slow-growing publishing businesses. The 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. Those assets accounted for roughly 90% of the operating profit in that period.
In the nine months through March, News Corp.'s various segments together had operating profit of $4.2 billion, of which the publishing division contributed $458 million.
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News Corp.'s stock price has outperformed several other big media companies in the past 12 months, at least in part because of significant increases in stock buybacks since last summer.
Chase Carey, News Corp.'s chief operating officer, said on an investor call in May that he was aware some shareholders favored a spinoff of the newspaper assets. At the time, Mr. Carey said management and the board had discussed the idea but didn't have plans to pursue it. Mr. Carey has long been thought to be more interested in a spinoff than Mr. Murdoch.
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A split would be a big change for Mr. Murdoch, who built News Corp. into a media conglomerate from a single Australian newspaper he inherited in the 1950s. Until the 1980s his focus was on expanding internationally in newspapers, moving to Britain in the late 1960s with the purchase of the News of the World and the London Sun, and then expanding into the U.S. in the early 1970s.
While News Corp. continued to expand in newspapers, as recently as 2007 buying Dow Jones, the focus of the company shifted toward film and television since the 1980s purchase of the 20th Century Fox film studio and a group of TV stations that formed the basis of the Fox broadcast network. News Corp. later started cable channels such as Fox News that now generate much of the company's earnings.
Mr. Murdoch personally has remained a big fan of the newspaper business. When the London Sun recently launched a Sunday edition, Mr. Murdoch spent time in London helping with preparations.
Write to Martin Peers at martin.peers@wsj.com, John Jannarone at john.jannarone@wsj.com and Anupreeta Das at anupreeta.das@wsj.com
News Corp., Rupert Murdoch, Getty ImagesNews Corp., Fox News, 20th Century Fox, News of the World
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