News Corp. Confirms Considering Restructuring

Separate Murdoch companies would own TV, print assets

By Jon Lafayette -- Broadcasting & Cable, 6/26/2012 10:12:49 AM

News Corp. confirmed reports on Tuesday that it is considering a restructuring that would create two companies, one of which would hold its TV and movie studio assets.

News Corp.'s cable TV assets, including FX, Fox News and its international channels have been driving the company's earnings for the past few years. On the other hand, the company's newspaper assets have been considered a drag on growth, especially since the phone hacking scandal broke at the British tabloid News of the World, which was shut down last year.

If the restructuring occurs, it is likely both companies will continue to be controlled by Rupert Murdoch, who started News Corp. with a single paper in Australia and remains a fan of the newspaper business, as evidenced by his acquisition of Wall Street Journal publisher Dow Jones.

The most recent report that News Corp. is studying separating the company's video and print assets appeared in the Wall Street Journal. The company's statement Tuesday morning said only that:  "News Corporation confirmed [Tuesday] that it is considering a restructuring to separate its business into two distinct publicly traded companies."

In a report Tuesday morning, David Joyce, analyst at Miller Tabak + Co., investors "will likely cheer" the transaction, if it actually takes place. "Value should be unlocked if the company decides to separate these assets," he said.

"While this is still not an official transaction, which means it would be roughly at least a year before it is completed, this would help [News Corp. COO] Chase Carey focus on the entertainment assets and not be distracted by the lingering phone hacking scandal in the U.K.," Joyce said. "However, from a legal standpoint, there is still likely no difference in corporate responsibility even with a spin/split off of the assets; however, any remaining legal costs and settlements would likely be allocated just to the publishing division."

News Corp. stock was up more than 7% in trading Tuesday morning.