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News Corp. considers split in 2, stock jumps

June 27, 2012
By RYAN NAKASHIMA , THE ASSOCIATED PRESS

LOS ANGELES - Under pressure to limit contagion from the British phone-hacking scandal, Rupert Murdoch's News Corp. said Tuesday that it is considering splitting into two publicly traded companies.

The move comes as Britain's communications regulator, Ofcom, enters the final stages of its review of whether satellite TV firm British Sky Broadcasting - of which News Corp. holds a 39 percent stake - is "fit and proper" to hold a broadcast license.

The separation of News Corp.'s tainted newspaper division from the lucrative TV and movie assets might appease regulators, analysts said.

Article Photos

AP?PHOTO
This 2010, file photo, shows News Corp.'s headquarters in New York. Under pressure to limit contagion from the British phone hacking scandal, Rupert Murdoch's News Corp. confirmed Tuesday, that it is considering splitting into two publicly traded companies. The Wall Street Journal, News Corp.'s flagship newspaper, reported late Monday that the company is considering the separation of the newspaper and book publishing businesses from the entertainment arm, which includes Fox News Channel, broadcast TV network and 20th Century Fox movie studio.

"I'm not saying it completely ameliorates Ofcom's concerns. But I think it helps," said Canaccord Genuity analyst Tom Eagan.

British investigators have been probing allegations that News Corp.'s U.K. newspaper journalists hacked into phones and bribed public officials in the hunt for scoops. The probe has caused the company to abandon its bid for full control of British Sky Broadcasting. A split could help the company avoid being forced to sell off its remaining stake, worth some $6.9 billion.

The media conglomerate did not specify Tuesday which businesses each company would contain.

The Wall Street Journal, News Corp.'s flagship newspaper, reported late Monday that the company is considering separating the newspaper and book publishing businesses from the entertainment arm, which includes Fox News Channel, its broadcast TV network and the 20th Century Fox movie studio.

The entertainment arm is far more profitable. It accounted for about 75 percent of the company's revenue and nearly all of the operating profit in the first nine months of the fiscal year, which ends this coming Saturday.

Bernstein analyst Todd Juenger said in a research note that the split would allow the company to invest more in the growing entertainment field "without the baggage of publishing."

Investors welcomed the news. News Corp.'s stock rose $1.72, or 8.5 percent, to $21.80 in mid-afternoon trading. During the day, shares reached as high as $21.89, the highest level since hitting $21.90 on Oct. 25, 2007.

A former News Corp. executive familiar with internal company deliberations says such a split has been talked about for years, although discussions gained new momentum in the wake of the phone-hacking scandal, which erupted last July.

 
 

 

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