News Corp. Publishing Company Will Start With $2.6 Billion in Cash

Rupert Murdoch - Delivers Keynote At The National Summit - H - 2011
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UPDATED: It will have "full financial flexibility to pursue its strategic agenda," while the post-split entertainment firm will indemnify it for future costs related to the phone-hacking scandal.

Rupert Murdoch's News Corp. said Friday that its publishing business will after its separation from the conglomerate's entertainment assets start out with $2.6 billion in cash.

That figure includes a planned $1.82 billion cash infusion from the current company, according to a regulatory filing.

News Corp. has long said that its split into two separate companies will allow both to pursue their own strategies, including investments in their businesses and possible acquisitions.

The publishing company, which will become the new News Corp., will have virtually no debt and "full financial flexibility to pursue its strategic agenda, which is to further develop and expand the power of its market-leading brands over a myriad of platforms," the conglomerate said in its filing. It didn't detail possible specific uses of the cash.

Possible future expenses tied to the U.K. phone-hacking scandal and related issues will be covered by the post-separation entertainment company, said the filing, mentioning possible "liabilities arising out of civil claims or investigations [and] costs and expenses related to the criminal matters." Wells Fargo analyst Marci Ryvicker said "these should be immaterial at this point."

The filing also said the publishing assets' value as of the end of 2012 amounted to about $18.6 billion. The company will include the Wall Street Journal, U.K. tabloid The Sun and Australian entertainment businesses, among others.

The separated entertainment company, Fox Group, will include News Corp.'s film and broadcast and cable networks operations. Morgan Stanley analyst Benjamin Swinburne this week wrote: "We expect Fox Group to be the fastest growing media company in fiscal year 2013-2015." 

The split to create the two separate publicly traded companies is scheduled to happen around mid-year.

Ryvicker said overall the filing should be viewed as "a positive" by investors. "Lack of debt on New News Corp. should help in terms of valuation as well as strategic flexibility, and our positive thesis on Fox Group remains intact," she said.

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