The News Corp. board of directors is expected to decide within days whether to start the process that would split the publishing assets from the company. The board is meeting in New York this week in a session called to discuss the restructuring. A decision could come as early as Wednesday — and at this point, it looks like the answer will be to move forward with a division.
The company admitted Tuesday that discussions on restructuring were underway; the statement came after its own financial news flagship, the Wall Street Journal, reported that the idea was being considered — and that Chairman and CEO Rupert Murdoch was more receptive than he has been to hiving off the publishing assets. The stock shot up Tuesday morning on the notion that News Corp. will spin off its publishing business, ending the day up more than 8 percent for the day at $21.97.
The Journal reported Tuesday night that the board is expected to decide tomorrow. I was told not to expect an announcement before Thursday but given the number of people involved, that doesn’t we’ll have to wait til then for the news.
I’ve confirmed reports that investment bank Goldman Sachs is on board; Reuters also reported that Blair Ephron’s Centerview has been hired.
News Corp.’s fiscal year ends June 30. This time last year the big push was to get rid of MySpace by the end of FY11 and have it off the books for FY12. This is different. Even if the board votes for a spinoff this week, the company is prepared for the process to take a year to complete between the various regulatory approvals, shareholder approval, and multiple tax jurisdictions. Starting the clock now would give it a shot at heading into FY14 as two companies, not one.
At this point, there are a lot more questions than answers but let’s run through a few:
What would be in the two companies? When the idea has been raised by investors, analysts or journalists, the focus usually has been on separating publishing from the entertainment assets contributing three quarters of the revenue and 90 percent of the profit. This version would put news publishing (Dow Jones, News International, other newspapers), book publisher HarperCollins, and the recent education effort, headed by Murdoch advisor Joel Klein, together. The other would include 20th Century Fox, Fox, Fox News, the Fox sports regionals and other cable networks, plus Sky Italia and other properties.
But that may not be what the board approves. According to a source familiar with the situation, that hasn’t been decided yet and there are variations. Would digital gaming publisher IGN stay with entertainment or go with publishing, for instance?
Who will run it?: The speculation in general is all a little cart before the horse but inevitable. If it mirrors some other splits and spinoffs, Rupert Murdoch at least would be chairman. Klein has been bandied about as CEO as has board member Lachlan Murdoch, the son who left News Corp. and has been building his own media business from a base in Australia. James Murdoch is still chairman of News Int. and would seem a natural under certain circumstances but he has been tarnished through the hacking revelations and investigations ; he also has a strong background in cable and satellite. Lex Fenwick, who recently took over Dow Jones as CEO and just did his own restructuring, has been suggested. Jon Miller, the head of digital for News Corp., could be an interesting candidate. Klein is not likely; his plans to establish and run News Corp.’s education business already were diverted once by his role as the head of the internal committee investigating the hacking allegations and the disclosures; he just handed that off and wants to focus on education.
Why now?: One suggestion is that Rupert Murdoch, who wanted to keep the newspapers, is more vulnerable because of the U.K. phone hacking scandal. I don’t see it that way, but hacking did lead to an executive shakeup at News Int. and the closing of lucrative UK tabloid News of the World. Investors want more clarity and less attention on the smallest part of the company. This would be a compromise with COO Chase Carey and others. Rupert Murdoch is pragmatic and if he can see a way to create more value by splitting things up, but he is also stubborn. If he doesn’t see the advantage he won’t support it. There are 16 board members and only three named Murdoch but the family holds control as shareholders and the board is unlikely to do anything Rupert Murdoch doesn’t want.
We should know more very soon.
Photo credit for Rupert Murdoch in earlier publishing days: Roger Ressmeyer/CORBIS