Murdoch's News Corp considering splitting in two

Rupert Murdoch’s News Corp. said it was considering splitting into two publicly traded companies, and sources familiar with the matter said publishing would be separated from entertainment.

The news sent News Corp. shares up by nearly 7 percent in morning trading on Nasdaq.

Shareholders have been pushing for some time for a spin-off of the slower-growth publishing division after a phone hacking scandal hit the company’s British newspapers. The scandal sent shockwaves through the group and forced News Corp. to drop its biggest-ever acquisition of the pay-TV group BSkyB .

According to one person familiar with the matter, a move to split the lucrative entertainment business from the publishing business is being championed by News Corp. chief operating officer Chase Carey, who sees it as way to boost shareholder value.

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The matter has been under discussion for a “considerable period of time” and no final decision has been made, a second source said. No plan has yet been proposed to the board, the source said.

News Corp. is controlled by chairman and chief executive Rupert Murdoch and his family.

The Wall Street Journal, which is owned by News Corp., reported on Tuesday that the Murdoch family was not expected to lose its effective control of any of the businesses involved if a split goes through.

Carey said in May that management and the board had discussed spinning off the publishing business following investor pressure but did not have any plans to push ahead at that time.

Murdoch had earlier opposed such a move and as recently as May said the group was not considering spinning off its British newspapers to protect the rest of the empire.

But the Journal, quoting one person familiar with the situation, reported that he has recently warmed to the idea.

The publishing division includes the HarperCollins book publisher, the education arm and newspapers including The Wall Street Journal, the Times of London, the Sun, the New York Post and The Australian.

The film and television businesses include 20th Century Fox film studio, Fox broadcasting network and Fox News channel. The entertainment business would dwarf the publishing unit, with assets in the entertainment division generating revenues of $23.5 billion in the year to June 2011, compared with $8.8 billion for the publishing business.

Analysts believe investors and some management will feel emboldened by the hacking scandal to push for a change at the company, where the 81-year-old Murdoch has long been seen as the main roadblock to a spin-off of the newspapers.

The Australian-born tycoon made his name by buying newspapers in Australia and then the News of the World, the Sun and the Times newspapers in Britain, and he talks often about his love for newspapers and the publishing industry.

Analysts in London said splitting the company in two would make sense and would be welcomed by investors. The value of the company plummeted last year at the height of the phone hacking scandal, before recovering this year to four-year highs, helped by a share buybacks.

News Corp. shares closed up 2.6 percent in Australia on Tuesday. They were up $1.365 to $21.45 in morning trading in New York.

Reuters