News Corp Thursday said its board has approved in principle a plan to separate the company’s publishing unit from entertainment, the news reports said.The split will unlock the value for the newly formed entertainment company and the publishing entity will require major cost cutting.
The 81-year old Chairman Rupert Murdoch is bowing to the demands of the shareholder after a costly year long scandal at his treasured newspaper operation, which is seen as a drag on the larger and growing film, broadcast and pay-television units, and the news paper reports said.
The shares have surged 25% this year, partly driven by speculation that arose after Chief Operating Officer Chase Carey said in the month of February that the company will consider a spin-off of the publishing division.
News Corp gets at least 70% of its annual profit from the publishing and television which includes Journal publisher Dow Jones, the New York Post and The Australian newspaper, contributing to about 18% of operating income in the fiscal 2011.
News Corp has a market value of $54.1 billion. The company may be worth $70 billion to $77 billion by valuing its business separately, according to Gabelli & Co and BMO Capital Markets.
The entertainment businesses could command as much as News Corp’s then-current market value of about $53 billion. In the nine months ended March 31, News Corp’s publishing unit generated a profit of $458 million.
News Corporation is an American multinational diversified mass media corporation based in United States. The company is the world’s third largest in entertainment as of 2009 and is controlled by Rupert Murdoch and his family members.