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.
