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News Corp splitting publishing, entertainment divisions

NEW YORK, Jun 28 – Rupert Murdoch’s News Corp announced Thursday it intends to split its huge entertainment division and struggling publishing business into two separate companies.

“News Corporation today announced that it intends to pursue the separation of its publishing and media and entertainment businesses into two distinct publicly traded companies,” the global conglomerate said in a statement.

Murdoch said he would be chairman of both companies, including an entertainment unit led by 20th Century Fox studios and Fox television assets, and a publishing unit that includes The Wall Street Journal and Times of London.

“There is much work to be done, but our board and I believe that this new corporate structure we are pursuing would accelerate News Corporation’s businesses to grow to new heights, and enable each company and its divisions to recognize their full potential — and unlock even greater long-term shareholder value,” Murdoch said in a statement.

The split would spin off the struggling publishing operations which have been hit by the slump in the newspaper industry from the more profitable entertainment division.

Murdoch, who is chairman and chief executive of News Corp, said the company has “a large and unparalleled portfolio of diversified assets” and that this structure has “become increasingly complex.”

“We determined that creating this new structure would simplify operations and greater align strategic priorities, enabling each company to better deliver on our commitments to consumers across the globe,” the Australian-born magnate said.

“I am 100 percent committed to the future of both the publishing and media and entertainment businesses and, if the board ultimately approves a separation, I would serve as chairman of both companies.”

A statement said News Corporation’s board authorized management to explore this separation after a meeting Wednesday.

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The publishing unit would include newspapers and information businesses in the US, Britain, and Australia, along with its book publishing division, marketing and education operations.

The media and entertainment company “would encompass News Corporation’s broadcast and worldwide cable networks, leading film and television production studios, television stations and highly successful pay-TV businesses in Europe and India,” the statement said.

The move comes with Murdoch’s empire under pressure from the phone-hacking scandal in Britain that resulted in the closure of the company’s flagship News of the World tabloid and the resignation of several senior executives.

Some see the move as an effort to fence off the hacking scandal and give Murdoch a chance to carry out his plan for a full takeover of satellite broadcaster BSkyB, in which News Corp has a 39 percent stake.

But the reorganization also could boost shareholder value for a conglomerate hurt by a so-called “Murdoch discount.”

News Corp shares have been rallying since word leaked out and the company confirmed it was considering a split.

Shares have now surged more than 11 percent since news of the split emerged earlier this week.

Andrew Anagnostellis at Deutsche Bank said in a note Wednesday that a split would be “a major positive for shares, even beyond the initial reaction, and would fit in with the many positive steps the company has been taking.”

The split, the analyst said, “could help isolate the hacking scandal from the rest of the company, both in terms of management distraction and contagion risk.

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“This would not absolve Newscorp from financial liability for historical behavior, but it would, in theory, give Mr Murdoch greater editorial freedom going forward,” he added..


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