Confirming speculation, media and entertainment giant News Corp. (NWS: Quote,NWSA: Quote) said Tuesday that it is considering separation of publishing and entertainment businesses into two distinct publicly traded companies. The company's shares are gaining more than 6 percent following the news.
The Wall Street Journal reported earlier in the day that News Corp. plans to separate the businesses, thus creating two companies. A separation is not expected to change the Murdoch family's control on any of the businesses, which is exercised through its roughly 40 percent voting stake in News Corp.
New York-based News Corp.'s publishing business includes The Wall Street Journal, the Times of London, The Australian newspaper and HarperCollins book publishing.
20th Century Fox film studio, Fox broadcast network and Fox News channel are part of the company's entertainment business, which generated the bulk of its revenue and operating profit in the first three quarters of this year.
News Corp.'s 81-year-old chairman and CEO Rupert Murdoch, who had previously opposed the idea of a split, is now said to be not averse to it.
The idea is said to be similar to the split of media conglomerate Viacom Inc. (VIA, VIA.B) into two companies in 2006, when CBS Corp. was spun off as a separate company. In that break up, Viacom's controlling shareholder Sumner Redstone ended up with control of both companies.
News Corp.'s outside investors are said to be more interested in the entertainment business, rather than in the smaller and slow-growing publishing business.
For the most recent third quarter, News Corp. reported a 47 percent surge in profit, bolstered mainly by its cable business and filmed entertainment division.
Operating income from cable networks, which is the biggest contributor to profit, rose 15 percent to $846 million, while filmed entertainment profit grew 10 percent to $272 million. Publishing division's profit, which includes newspapers and books, more than tripled to $130 million.
News Corp.'s decision to consider a restructuring comes in the wake of the embarrassing phone hacking scandal at the company's UK operations recently.
The five-year old scandal involves allegations that News Corp.'s 'News of the World' tabloid illegally accessed mobile-phone voice mails to gain information about celebrities, politicians and crime victims, including that of a 13-year-old murdered schoolgirl Milly Dowler.
The 168-year old tabloid was charged of unethical reporting tactics, which triggered an outrage in Britain and led to its closure in July 2011.
News Corp.'s 9 billion pound bid to acquire satellite broadcaster British Sky Broadcasting Group Plc or BskyB (BSYBY.PK, BSY.L) broke down following the company's involvement in the phone-hacking scandal.
It also led to Rupert Murdoch's son James Murdoch stepping down as executive chairman of News International Ltd., the British newspaper subsidiary of News Corp., and as chairman of BskyB.
The younger Murdoch became the central focus of investigations in the U.S. and abroad for the failures of judgment, oversight and accountability that allowed the hacking scandal in the UK to escalate into a full-blown corporate crisis.
In Tuesday's regular session, NWSA is trading at $21.30, up $1.22 or 6.05 percent on a volume of 25.71 million shares.
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by RTT Staff Writer
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