News Corp watchers have been talking about a possible split of Rupert Murdoch’s massive entertainment and publishing empire for some time, and it looks like they are finally on the right side of the guesswork, as the News Corp board met on Wednesday to consider separating Murdoch’s entertainment from his publishing division.
For some time, Murdoch has resisted calls to split his empire into separate sections — even as recent as last month — but after the wiretapping scandals that hit his British newspapers, the idea seems to have become more acceptable to the media giant.
While the initial meeting was held Wednesday, the final decision might not be known until later Thursday, and the whole process could take as long as a year to work out.
This is not halving of the corporation, though. The publishing portion of the company is far smaller than the newer education/entertainment division, so the idea that we are about to witness a “splitting in half” of News Corp is an overstatement.
The Wall Street Journal reports:
The entertainment assets make up by far the bulk of the company, contributing three-quarters of the $25.34 billion in revenue for the first nine months of the fiscal year. Those assets accounted for roughly 90% of the operating profit in that period.
In the nine months through March, News Corp.’s various segments together had operating profit of $4.2 billion, of which the publishing division contributed $458 million.
Obviously the entertainment division has been quite successful and industry watchers have noted that the troubles besetting the publishing arm could be dragging down the more successful portion of the company.
Britain isn’t the only nation looking into News Corp’s phone hacking scandal. The U.S. Justice Department is also looking into the scandal hunting for evidence of bribery and wiretapping. So it may be a good move to shield the currently successful entertainment division from any future legal fallout.
Clare Enders, founder of the media research company Enders Analysis, says that the TV and entertainment assets have been “run on a standalone basis,” and without the publishing assets dragging them down, they would see their valuation rise to a much higher level.
With the continuing investigation into the phone hacking accusations centered on News Corp’s British newspapers, it makes good business sense to make sure the entertainment division is on secure footing.
Enders thinks she sees Rupert Murdoch’s fingerprints all over this move, so there would be no truth to any claim that Murdoch has been forced to this decision by board members or others.
“He is a corporate action man. He’s a doer,” Ender said.
Reports say that News Corp is working with bankers at Centerview Partners, Goldman Sachs, and JP Morgan, as well as lawyers at Skadden Arps.
Industry watchers also say that there is little doubt that this split will occur.
“It sounds pretty well along,” said Canaccord Genuity Inc analyst Thomas Eagan.
Finally, there is no indication what this move might portend for Fox Television heads Peter Rice and Kevin Reilly, but News Corp’s current number 2 man is seen as the likely candidate to take the head of the new entertainment division.