LOS ANGELES —
Rupert Murdoch’s News Corp. said Thursday that its board has approved a plan to split into two companies, one containing struggling newspaper and book publishing businesses and the other comprising faster-growing entertainment operations.
Murdoch will serve as chairman of both new companies and CEO of the entertainment company. The Murdoch family, which controls nearly 40 percent of the voting shares in News Corp., is expected to maintain control of both companies.
News Corp.’s board unanimously approved the split in principle. It will take a more formal look at the plan’s details in coming months. The separation is also subject to regulatory approval and is expected to take about a year.
The split of News Corp. is a symbolic turning point for Murdoch, the company’s 81-year-old CEO. Through the years, Murdoch maintained a fondness for newspapers even as he purchased entertainment companies and built a media conglomerate with a market value of $53 billion. In hearings last summer before U.K. lawmakers, he conceded that he regularly called newspaper editors under his employ with the greeting: “What’s doing?”
Investors have already applauded the change. Since news of the split broke early Tuesday, News Corp. shares are up 9 percent. They slipped 32 cents, or 1.4 percent, to $21.99 on Thursday.
News Corp. said existing shareholders will get one share of stock in the publishing company for every News Corp. share they own. The exact ratio could change. Each company would maintain two classes of stock, voting shares and non-voting shares.
Murdoch is hoping the television and movie company will be more highly valued by shareholders who had been unwilling to accept the dour growth prospects of the newspaper and book business.
But he now faces the challenge of making the publishing division attractive to investors. Taken as a whole, News Corp.’s entertainment businesses are much more promising. In the nine months through March, the combined cable channel, TV station, satellite TV and movie businesses saw revenue rise 9 percent to $18.66 billion. Operating profit rose 23 percent to $4.17 billion.
By contrast, the publishing arm’s revenues and profits have been shrinking over the same period. Revenues declined 4 percent to $6.22 billion while operating profits slipped 22 percent to $458 million.
The entire newspaper industry is struggling. Companies that once spent money for newspaper advertisements have been flocking to the Internet in search of cheaper ad space. Print newspaper subscriptions continue to fall. Meanwhile, digital subscriptions and ads at newspaper companies have been slow to make up for the decline.
“News has been reduced to being a minor part of what we now think of as media,” said newspaper analyst Ken Doctor said, writer of the Newsonomics blog. “News needs to be thought of differently and, in a sense, subsidized.”
Investors have long pestered News Corp. to get rid of the newspaper business. Murdoch acknowledged Thursday that the idea has been discussed internally for more than three years.
Still, he said he rejects “naysayers” who doubt the long-term future of the printed word.
“The answer is one word: it’s digital,” Murdoch said to analysts on a conference call. “People are buying pure papers printed on crushed wood, but they are equally getting their news in many other forms.”
Even so, Murdoch plans to put money behind those words. To address the concerns of future shareholders, he promised that the publishing division will be split off with “a robust net cash position” to be used for potential acquisitions.
News Corp. had $10.7 billion in cash and cash equivalents on hand at the end of March.
Analysts said the split will allow Murdoch to pursue the newspaper business with the same fervor he had when he began building his empire 60 years ago. It also contains the possible damage from mistakes, such as the one he made when he overpaid for Dow Jones & Co. in 2007.
“Once the companies are separated, he’ll be able to make acquisitions without upsetting the valuation of the entertainment business,” said Alan Gould, an analyst with Evercore Partners. “I don’t worry about the acquisitions he’s doing 2 to 3 years down the road in publishing.”
The entertainment company will have its challenges too. While growing faster, News Corp.’s entertainment business is by no means perfect. Movie studios face declining DVD sales. One year a studio can produce a slew of blockbuster movie hits, another year it can churn out box office bombs. TV stations are slowly recovering in the aftermath of the Great Recession, thanks to political ad spending and the newfound health of the U.S. auto industry.
The stalwarts in News Corp.’s entertainment stable have been cable television channels like Fox News Channel and FX, which are growing quickly in places like India and Russia, where incomes are rising.
Murdoch denied that the timing of the split was due to a U.K. probe of News Corp.’s British newspapers over alleged phone hacking and bribery.
Some investors were unhappy with the announcement that all of the company’s Australian assets, including the planned acquisition of Consolidated Media Holdings for $2 billion, would be housed with the new publishing company. Consolidated holds a 50 percent stake in pay TV operator Foxtel and all of Fox Sports in Australia.
Another complication: Murdoch said the split could cause a “moderate slowing down” of a stock buyback program. The company is nearly half way through a two-year $10 billion plan set to wrap up next June.
———
Business Writer Bree Fowler in New York contributed to this report.
National, International News
News Corp. approves Murdoch plan to split company
- National, International News
-
-
Wave of attacks kills at least 95 in Iraq
A wave of attacks killed at least 95 people in Shiite and Sunni areas of Iraq on Monday, officials said, pushing the death toll over the past week to more than 240 and extending one of the most sustained bouts of sectarian violence the country has seen in years.
-
Arias attorneys will put one witness on: Arias
Complaining that Jodi Arias’ sensational murder case has become a modern-day “witch trial,” her lawyers tried to quit in the middle of the death-penalty phase Monday, then said they will call only one witness: Arias.
-
Oklahoma twister tracked path of 1999 tornado
Monday’s powerful tornado in suburban Oklahoma City loosely followed the path of a killer twister that slammed the region in May 1999.
-
Dozens killed as tornado ravages Oklahoma City area
A powerful late-afternoon tornado leveled much of this Oklahoma community Monday, killing at least 51 people. Reporters on helicopters flying above the scene described the scene as “devastating.”
-
Today in History for Tuesday, May 21, 2013
Today is Tuesday, May 21, the 141st day of 2013. There are 224 days left in the year.
-
Several Republicans weigh challenge to Barrow
Now that Rep. John Barrow has turned down a campaign for the U.S. Senate, the challenge ahead for the Deep South’s last white Democratic congressman will be to defy the odds a second time by winning re-election in an eastern Georgia district that was drawn to ensure his defeat.
-
‘Trek’ does $70.6M but falls short of studio hopes
“Star Trek: Into Darkness” has warped its way to a $70.6 million domestic launch from Friday to Sunday, though it’s not setting any light-speed records with a debut that’s lower than the studio’s expectations.
-
Syrian troops push into strategic rebel-held town
Syrian troops pushed into a rebel-held town near the Lebanese border on Sunday, fighting house-to-house and bombing from the air as President Bashar Assad tried to strengthen his grip on a strategic strip of land running from the capital to the Mediterranean coast.
-
Taylor Swift wins 8 trophies at Billboard Awards
Another day, another domination for Taylor Swift: She was the red hot winner at the Billboard Music Awards.
-
Tornadoes level homes in Okla., 21 injured
One of several tornadoes that touched down Sunday in Oklahoma turned homes in a trailer park near Oklahoma City into splinters and rubble and sent frightened residents along a 100-mile corridor scurrying for shelter.
- More National, International News Headlines
-



