Mark Wilson/Getty ImagesRupert Murdoch, chairman and chief executive of the News Corporation.Top executives at News Corporation met on Tuesday to discuss a potential breakup that would sever the media company’s underperforming newspapers from its lucrative entertainment assets.
The spinoff, which could be announced as early as this week, comes as News Corporation’s newspapers, once the foundation of Rupert Murdoch’s $50 billion media empire, face financial strain and a decline in print advertising. The company’s British publishing unit, meanwhile, is still reeling from a phone-hacking scandal that led to the closure of its News of the World tabloid.
For years, investors and high-level News Corporation executives have pushed for a spinoff of the newspapers. But Mr. Murdoch, a newspaperman at heart who built his company from a single paper in Adelaide, Australia, has consistently rejected those proposals.
On Tuesday, top editors and publishers from the company’s newspapers around the world arrived in New York to discuss the proposed separation and what the newly formed company would look like, according to people close to the company who could not publicly discuss the private meeting. The meeting held Tuesday afternoon at the company’s Midtown Manhattan headquarters was said to include Mr. Murdoch; his son James Murdoch; and Chase Carey, the company’s chief operating officer.
The gathering was largely intended to squelch anxiety and unrest among top editors. A main concern is that the separation would leave the newspaper business vulnerable without the high-performing entertainment assets propping them up financially, one of the people said.
Restive shareholders have often said they would prefer that the company focus on its entertainment assets, which together generated $23.5 billion in revenue in the year that ended in June 2011. The publishing business, by contrast, contributed $8.8 billion in revenue.
The separate company could include The Wall Street Journal, The Times of London, The New York Post and as many as 175 other newspapers, according to people with knowledge of the matter. It is also likely to house the HarperCollins book business and a newly formed education division run by Joel Klein, the former New York schools chancellor and a trusted adviser to Rupert Murdoch.
The Murdoch family would likely maintain its roughly 40 percent voting stake in News Corporation, giving the family continued control over both companies. News Corporation management is likely to remain in place, under Mr. Carey and James Murdoch, currently the deputy chief operating officer. Rupert Murdoch would potentially serve as chairman of both companies, though a person close to the company cautioned that no executive decisions have been made.
Mr. Carey and others have contemplated ideas to make the publishing company less vulnerable, including making Mr. Klein’s education division a part of the newly formed company. Other businesses like Australian classified advertising companies and other digital assets like Monster.com, which the company does not own but has considered for acquisition, would likely be part of the publishing division.
The executive ladder of the separate company has not been established. But two people close to the company said Robert Thomson — editor in chief of The Journal and managing editor of its parent company, Dow Jones & Company, and a close confidant of Rupert Murdoch’ s — is a possible candidate.
“Dow Jones is the trophy asset so it make sense,” one of these people said.
The list of well-regarded executives who could lead the new unit could also include Lex Fenwick, the newly named chief executive of Dow Jones, or Tom Mockridge, chief executive of the British newspaper unit News International, according to another person close to the company.
A News Corporation spokesman declined to comment on what the spun off company would look like. In a statement, the company said, “News Corporation confirmed today that it is considering a restructuring to separate its business into two distinct publicly traded companies.”
Mr. Carey has championed separating the companies to bolster the high-performing entertainment divisions. At a Deutsche Bank media conference in Palm Beach, Fla., last March, he said that in the company “certainly there are a number of parties who feel — would push to looking at a way to spin the publishing business separate from the rest.” He later clarified on an earnings call that he was referring to investors and not News Corporation executives.
“This is an idea everyone has wanted from a purely economic point of view long before the scandal happened,” said one person close to News Corporation who could not discuss corporate strategy publicly.
The move could help placate investors, who have watched their shares suffer from what analysts call a “Murdoch discount.” On Tuesday, News Corporation’s stock was up 6.4 percent to $21.75.
“They’re working to relieve the Murdoch discount,” said Michael Nathanson, a media analyst at Nomura Securities. “All the good work they’ve been doing in video lately has just been hurt by weaknesses in print, and there’s no reason for that connection.”
The announcement on Tuesday, first reported in The Journal, comes as the British regulatory agency Ofcom is expected to release its report on whether News Corporation is “fit and proper” to control 39 percent of satellite broadcaster British Sky Broadcasting before the Olympics begin on July 27, according to analysts. Spinning off the newspapers could influence Ofcom’s decision, analysts said.
“The timing is because of the Olympics,” said Thomas Eagan, a media analyst at Canaccord Genuity Securities. “They’re looking at ways to help Ofcom make a decision that is favorable to News Corporation.”
Ofcom said it continues to weigh the matter. “We haven’t given any timetable on our fit and proper assessment. We will make a decision in due course,” said Chris Wynn, a spokesman for Ofcom.
Investigations continue into charges of phone-hacking by News Corporation’s British newspapers, a damaging scandal that led the company to close the tabloid News of the World and undermined News Corporation’s $12 billion bid for the portion of British Sky Broadcasting that it did not already own.
Fallout from the hacking scandal has grown in the last year to touch on an array of figures, including Prime Minister David Cameron of Britain and James Murdoch, who led the company’s British newspaper operations.
News Corporation’s plan is not unlike the separation of Viacom and the CBS Corporation in 2006, a move that left the company’s chairman and controlling stakeholder, Sumner Redstone, in control of both companies. Viacom’s stock price has nearly tripled since the split.
Michael J. de la Merced contributed reporting.
No comments:
Post a Comment