News Corp. Board Clears Business Split - Analyst Blog

By Zacks Equity Research,

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News Corporation ( NWSA ) recently announced that its board of directors has consented to the company's earlier decision of splitting its operations into 2 separate publicly traded publishing and entertainment entities.

The diversification is expected to culminate on Jun 28, 2013. Alongside, the company announced the board members for the separated entities.

Post split, the Entertainment company (to be named 21 st Century Fox) will encompass cable and television assets, filmed entertainment, and direct satellite broadcasting businesses including Fox broadcasting, cable network, Fox News Channel, the 20th Century Fox movie studio, BSkyB, Sky Italia, Sky Deutschland, and pay-TV operations in Europe and India.

Additionally, the Publishing company (to be known as News Corporation) will comprise publishing businesses, education unit and the integrated marketing services business, with brands like The Wall Street Journal , HarperCollins and Amplify .

With regards to the separation, the company announced that the shareholders of the company will receive one share in the new publishing company for every four shares they hold in the existing one. Moreover, to prevent unfavorable takeovers, News Corporation adopted a poison pill provision, which will be applicable for one year post split.

The split is expected to augur well for News Corporation, which has been in troubled waters since the revelation of the phone hacking scandal. In addition, it will definitely help the company improve its financials.

It is, however, apparent that the entertainment company with better prospects will have a greater chance of luring investors than the publishing entity, which is grappling with declining revenues.

The company is fortifying its entertainment division by focusing on enhancing its portfolio of regional sports channels to solidify its Fox Sports Media Group's position in the lucrative sports entertainment business, where it competes with Walt Disney Company 's ( DIS ) sports coverage network, ESPN.

On the other hand, News Corporation stated that its new publishing company will start operations with $2.6 billion in cash and no debt once its planned spin-off is complete. We believe that with adequate cash, the new News Corporation will be better positioned than its peers, The New York Times Company ( NYT ) and Gannett Co., Inc . ( GCI ) to make strategic acquisitions and expand its business.

In addition the company authorized a new $500 million share buyback program for the newly created News Corporation. 

Currently, shares of News Corp carry a Zacks Rank #3 (Hold).

DISNEY WALT (DIS): Free Stock Analysis Report

GANNETT INC (GCI): Free Stock Analysis Report

NEWS CORP INC-A (NWSA): Free Stock Analysis Report

NY TIMES A (NYT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: DIS , GCI , NWSA , NYT

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