News Corp Splitting Up Phone Hacking Business

Jun 26, 2012
J. Webster
Comments Off on News Corp Splitting Up Phone Hacking Business

I kid, I kid, of course News Corp isn’t splitting up the phone hacking business, just splitting the company in two so as to save themselves from a failing newspaper business if you’re not able to hack celebrity phones.

On Tuesday, media conglomerate News Corporation (NWS) confirmed they are considering splitting the company into two separate entities. Late Monday night, both the New York Times and Wall Street Journal reported that the company was considering a split. The company, ran by Rupert Murdoch, would split its businesses into two publicly traded companies, with one owning the company’s newspaper assets, and the other owning film and television assets. Most likely the move is necessary to hide Murdoch’s scandals involving celebrity phone hacking from quality and much loved assets like The Simpsons and American Idol.

Chairman Rupert Murdoch had previously been against splitting his media empire into two companies. It appears he has warmed up to the idea as long as he can maintain voting control of the company. News Corporation shares have seen a rise this year on a large share buyback announcement. Since last July, News Corporation has raised its buyback amount twice. The new buyback amount totaled $10 billion. Since last July, News Corporation has bought back $3.9 billion worth of News Corporation shares.

The spin-off of the film and television segment would create a growing company against the company’s newspaper business. Newspapers have had a hard time attracting investors as they lose customers and advertisers in a digital age. The newspaper business was also hit by a scandal involving the company’s News of the World newspaper.

The film and television segment includes network television, cable television, movie distribution, and international assets as well.

Cable Networks

• Big Ten Network, Fox Business, Fox Movie Channel, Fox News, Fox College Sports, Fox Sports Enterprises, Fox Deportes, Fox Sports Net, Fox Soccer, Fuel TV, FX, National Geo Wild, National Geographic Channel, Speed, Star, Stats

Network Television

• Fox Broadcasting, Fox Sports, Fox Sports Australia, Fox Television Studios, My Network TV

Filmed Entertainment

• 20th Century Fox, 20th Century Fox Espanol, 20th Century Fox Home Entertainment, 20th Century Fox International, 20th Century Fox Television, Fox Searchlight Pictures, Fox Studios Australia, Fox Studios LA, Fox Television Studios, Blue Sky Studios, Shine Group

International Satellite Television

• BSKYB – minority stake in England’s largest digital pay television platform
• Foxtel – Australia
• Sky Deutschland – Germany
• Sky Italia – Italy’s number one pay television company which has over 4 million subscribers

The second company containing the newspaper assets would include:

Newspapers

• Daily Telegraph, Herald Sun, New York Post, Sunday Times, The Australian, The Sun, The Times, The Wall Street Journal, Weekly Times, and others

Book Publishing

• Harper Collins, Zondervan

Perhaps the newly formed newspaper group will interest Warren Buffett and Berkshire Hathaway. Warren Buffett made news by purchasing local newspapers and essentially saving them from the dead. The legendary investor has said he will continue to purchase local newspapers from small communities. Would Buffett be interested in the scandal laced newspapers that News Corporation is spinning off? No way.

It appears that the split is favored by shareholders and investors. Shares of News Corporation are up over six percent in Tuesday’s trading session. Shares hit a new fifty two week high. Shares now trade above $21 for the first time since 2007.

Other companies have had success splitting off their assets into unique separate pieces. Fortune Brands spun off its home furnishings and liquor brands. Expedia split its travel business into two businesses. Later this year Kraft will split its large food conglomerate into two public companies. Cigarette maker Altria has had huge success spinning off assets that have included Kraft Foods and Phillip Morris International. Activists and shareholders have been calling for large companies to spin off assets to unlock value. People have even called for large conglomerate General Electric to split into several publicly traded separate companies. Time will tell if News Corporation’s move paid off, but it appears that investors think the result will be positive.

In the end Murdoch just wants to save himself from any more hearings and pies in the face.

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