News Corp. Approves Plan to Split Company (Report)
UPDATED: The move, expected to be formally announced Thursday, will see one company house the bulk of the publishing assets and the other the bulk of the TV, film and other entertainment assets.
After a 90-minute meeting in New York on Wednesday, News Corp. approved a plan in theory to split the company in two, the Wall Street Journal reported.
According to the Journal, a newspaper that is owned by News Corp., company chairman and CEO Rupert Murdoch spoke during the meeting and financial advisers made presentations.
Afterward, the board of directors voted unanimously to split the media conglomerate into two companies, one of which would house the bulk of the publishing assets and the other the bulk of the TV, film and other entertainment assets.
The Dow Jones Newswires, also owned by News Corp., confirmed the Journal's report. Both publications cite sources who spoke on the condition of anonyimity.
The split is expected to be formally announced Thursday morning, and Murdoch will likely discuss the decision on the Fox Business Network with Neil Cavuto shortly thereafter.
Shares of News Corp. have climbed 11 percent to $22.41 since the company confirmed Tuesday that it was considering such a plan. On Wednesday, BTIG analyst Richard Greenfield upped by $6 his target price to $30.
The analyst assumes that News Corp. will infuse the new publishing company with $1 billion in cash and that the "legal costs associated with the phone-hacking scandal travel with the publishing assets."
Greenfield surmised the "entertainment" company will grow revenue at 6.3 percent annually to $30.9 billion in 2015 while the "publishing" company will post revenue that shrinks 3.3 percent annually to $7.4 billion in 2015. A combined company would grow revenue by 4.2 percent annually to $38.3 billion in 2015.
The Dow Jones Newswires said that when the entertainment company is freed from the phone-hacking scandal at News Corp's. British newspapers it will make it easier for that entity to make acquisitions.
"Another reason why it makes sense for News Corp. to consider splitting the company," SNL analysts wrote Wednesday, "is that it might attract investors who had previously been interested in the company's entertainment holdings but who had held off buying shares in the company because of its publishing assets."
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