News Corp. Agrees to Split

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As expected, News Corp.'s board of directors authorized the company to explore the split of its publishing, television and movie studio assets into two separate publicly traded companies.
The deal, expected since Tuesday (June 26) when the Wall Street Journal broke a story that its parent was considering the move, could take up to a year to complete. According to News Corp., after a special meeting of shareholders to approve the split is held sometime in the second half of the calendar year, shareholders would receive one share of the new publishing unit stock for every share of News Corp. they hold. That would likely price the stock, which would include newspapers the New York Post, the Wall Street Journal, The Times of London, the Sun and The Australian, book publisher HarperCollins and its digital education unit - at between $3 and $3.81 per share, according to Miller Tabak media analyst David Joyce. No CEO was announced of the the publishing arm.
The television and film unit would include News Corp.'s cable channels - Fox News Channel, FX, National Geographic, Fox Business Network, Fox Sports, Star and Fox International Channels -- its Fox broadcasting network and its owned and operated television stations, the 20th Century Fox film studio, 20th Century Fox Television, the Shine Group and its interests in European satellite giants British Sky Broadcasting, Sky Italia and Sky Deutschland.
The media and entertainment unit will be headed by current News Corp. chief operating officer Chase Carey. News Corp. said over the next several months it will assemble management teams and boards of directors for both companies.
Both units would be chaired by current News Corp. chairman and CEO Rupert Murdoch.
"There is much work to be done, but our board and I believe that this new corporate structure we are pursuing would accelerate News Corporation'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," Murdoch said in a statement.
Most analysts have anticipated the split and cheered the move, adding that it should unlock some value for both assets. While complete details of the structure of the split are not yet available, most analysts believe that the publishing unit will be debt free and will receive a large chunk of News Corp.'s cash - perhaps as much as $1.8 billion. That could allow the publishing business to not only saddle the cost of the on-going phone hacking scandal at its shuttered U.K. tabloid News of the World, but also give the company currency to acquire additional assets in the space.
For the television and film unit, News Corp. is transformed into a pure-play content company that could be even more attractive to investors. Joyce, in a research note, estimated that after the split the television and film unit could be worth about $23 per share, about 13% above its Monday close of $20.28 per share. After the Journal story broke on June 26, News Corp. stock has been on a roll, climbing to $22.41 per share on June 27, up 10.5% ($2.13 each) from Monday. The stock was down about 8 cents each to $22.33 in early trading Thursday.

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