8:56 am Jun. 28, 2012
Following two days of intense speculation, News Corp. announced this morning that it intends to bifurcate its $54 billion publishing and entertainment holdings into two separate, publicly traded companies.
The split, which is expected to be implemented over the next 12 months pending final approval from the company's board, will separate newspapers like The Wall Street Journal, the New York Post and The Times of London from film and TV assets like 20th Century Fox and Fox News Channel.
The move is being lauded as an opportunity for the lucrative film and television assets of the corporation to realize greater value, without the drag of the less profitable newspaper and book publishing operation. But by the same token, the publishing company is left without the cushion its less profitable operations have relied upon for decades.
The newspaper business has been wounded by the ongoing phone-hacking and corruption scandal at News Corp's British publishing arm, but it is really the regulatory hurdles that the ongoing investigations have put in the path of the company's entertainment and television expansion plans that have rankled investors.
The company nevertheless continues to say that splitting itself in two will not just benefit the television and entertainment side of the business, but free up the publishing side as well.
"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,” said News Corp. chairman and C.E.O. Rupert Murdoch in a statement this morning.
“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," he 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.”
Murdoch will remain C.E.O. only of the entertainment business, however, with a new C.E.O. to be named to lead the publishing component. One name that has been bandied about among News Corp. watchers as an obvious candidate is Robert Thomson, a longtime lieutenant who currently serves as managing editor of The Wall Street Journal and editor-in-chief of its sister news service, Dow Jones.
In a letter to staff obtained this morning by the website paidContent and others, Murdoch reiterated his confidence in the newspaper brands that he has long held close to his heart, and which have long been perceived to serve as a powerful tool with which the 81-year-old mogul could wield influence in the political and social spheres of New York, Britain and his native Australia.
"Our publishing businesses are greatly undervalued by the skeptics," he said. "Through this transformation we will unleash their real potential, and be able to better articulate the true value they hold for shareholders. Our aim is to create the most ambitious, well-capitalized and highly motivated publishing company in the world, consisting of the largest collection of our news and publishing brands."
Internally, employees of the companies that will fall under the publishing arm have expressed skepticism that they can survive without the affiliation with News Corp.'s more profitable brands; analysts like Ken Doctor have said that it is difficult to see how the publishing unit can improve its performance without undergoing severe cost-cutting measures.
Following the announcement, Murdoch took questions from investors via conference call, which AllThingsD's Peter Kafka live-blogged here.
Expect a flood of followups, criticism and commentary to continue flowing throughout the next few days.
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