In an official announcement this morning confirming multiple media reports that the company was exploring splitting into two parts — media and entertainment and publishing — News Corp. touted the value that the new publishing business would bring to shareholders:
The publishing company would incorporate some of the world’s most successful print, digital and information services brands including Dow Jones, the Wall Street Journal, Dow Jones Newswires, HarperCollins, the New York Post, and the Daily, as well as offer the rich diversity of assets in Australia, including leading brands such as the Australian, the Herald Sun, the Daily Telegraph and the Courier Mail. In addition, the company would include the Times, the Sun, the Sunday Times, as well as News Corporation’s integrated marketing services group and its ground-breaking digital education group, including Wireless Generation. With a balanced portfolio of stable and growing news publishing brands and other assets, shareholders would benefit from strong and consistent free cash flow generated by these businesses, over multiple platforms.
Upon closing of the deal, Murdoch will be chairman of both companies. Murdoch will also be CEO of the media and entertainment company, anchored by Fox, Sky and News Corp.’s other entertainment assets. Chase Carey, long-time Murdoch lieutenant, will be president and chief operating officer of the entertainment division. A CEO for the publishing side has not yet been named.
Below, in full, the official announcement, followed by a letter from Murdoch to News Corp. staffers:
News Corporation today announced that it intends to pursue the separation of its publishing and media and entertainment businesses into two distinct publicly traded companies. Upon closing of such a transaction, shareholders would hold interests in a world-class publishing company, consisting of the largest collection of best-in-class publishing assets and a new digital education group, and an unmatched global media and entertainment company, each of which would benefit from enhanced strategic alignment and increased operational flexibility with respect to an unparalleled portfolio of assets, brands and franchises.
News Corporation’s board authorised management to explore this separation after a board meeting yesterday.
The proposed transaction would create global category leaders in both publishing and entertainment: a publishing company, which would be comprised of News Corporation’s newspapers and information businesses in the US, UK and Australia, the company’s leading book publishing brands, its integrated marketing services company, its digital education group, as well as its other assets in Australia; and a global media and entertainment company, which would encompass News Corporation’s broadcast and worldwide cable networks, leading film and television production studios, television stations and highly successful pay-TV businesses in Europe and India.
“There is much work to be done, but our board and I believe that this new corporate structure we are pursuing would accelerate News Corporation’s businesses to grow to new heights, and enable each company and its divisions to recognise their full potential – and unlock even greater long-term shareholder value,” said Rupert Murdoch, chairman and CEO of News Corporation. “News Corporation’s 60-year heritage of developing world-class media brands has resulted in a large and unparalleled portfolio of diversified assets. We recognise that over the years, News Corporation’s broad collection of assets have become increasingly complex. We determined that creating this new structure would simplify operations and greater align strategic priorities, enabling each company to better deliver on our commitments to consumers across the globe. I am 100% committed to the future of both the publishing and media and entertainment businesses and, if the board ultimately approves a separation, I would serve as chairman of both companies.”
News Corporation believes that a separation of the businesses into distinct public corporations with their own identities and strategies would enhance overall shareholder value and allow each company to:
• Focus on and pursue distinct strategic priorities and industry-specific opportunities that would maximise their long-term potential.
• Benefit from greater financial and operational flexibility and better position each company to compete.
• Respond and react more quickly to rapidly-evolving technology and global market opportunities.
• Tailor its capital structure, and allocate and deploy resources in a manner consistent with its strategic objectives that best enhances value for its respective shareholder group.
With more focus devoted to each business’ financial and operational structure, investors would be able to more clearly evaluate the inherent value of both portfolios of assets and invest in each company accordingly.
The new global media and entertainment company that would be created through the proposed transaction would consist of News Corporation’s highly-profitable cable and television assets, filmed entertainment, and direct satellite broadcasting businesses, including Fox Broadcasting, 20th Century Fox Film, 20th Century Fox Television, Fox Sports, Fox International Channels, Fox News Channel, Fox Business Network, FX, Star, the National Geographic Channels, Shine Group, Fox Television Stations, BSkyB, Sky Italia and Sky Deutschland, among others. As a pure-play content producer and distributor, the Company would build on its deep heritage in developing incredibly strong, premium content for distribution on screens of all sizes by leveraging its leading content across its entertainment and cable news verticals, as well as its unparalleled collection of regional sports networks, and the industry’s leading movie and TV production and distribution company. In addition, the entertainment company would benefit from its rapidly growing, high-margin cable network and pay-TV assets, and the distribution capabilities and opportunities associated with its unrivaled global footprint with significant scale across North and South America, Europe and Asia.
The new global publishing company that would be created through the proposed transaction would consist of News Corporation’s current publishing businesses, as well as its book publishing, education and integrated marketing services divisions. The new publishing company would create a scaled publishing platform that would be one of the best capitalised in the industry. The publishing company would have the opportunity to leverage its trusted brands for innovation and value creation across all traditional and digital platforms. The publishing company would incorporate some of the world’s most successful print, digital and information services brands including Dow Jones, the Wall Street Journal, Dow Jones Newswires, HarperCollins, the New York Post, and the Daily, as well as offer the rich diversity of assets in Australia, including leading brands such as the Australian, the Herald Sun, the Daily Telegraph and the Courier Mail. In addition, the company would include the Times, the Sun, the Sunday Times, as well as News Corporation’s integrated marketing services group and its ground-breaking digital education group, including Wireless Generation. With a balanced portfolio of stable and growing news publishing brands and other assets, shareholders would benefit from strong and consistent free cash flow generated by these businesses, over multiple platforms.
Upon closing of the proposed transaction, News Corporation’s shareholders would receive one share of common stock in the new company for each same class News Corporation share currently held. Following the separation, each company would maintain two classes of common stock: class A common and class B common Voting Shares.
Upon closing of the proposed transaction, Rupert Murdoch would serve as chairman of both companies and CEO of the media and entertainment company. Chase Carey would serve as president and COO of the media and entertainment company. Over the next several months, the company will assemble management teams and boards of directors for both businesses.
The separation is expected to be completed in approximately 12 months. Management is developing detailed plans for the board’s further consideration and final approval. To execute the transaction requires further work on structure, management, governance, and other significant matters. After receiving final approval of the board of directors, News Corporation will convene a special shareholder meeting to consider the transaction. This meeting is not expected to take place until the first half of calendar 2013. During the closing process, News Corporation will remain focused on delivering the best possible results for the benefit of its consumers, customers and shareholders.
In addition to shareholder approval, the completion of the separation will also be subject to receipt of regulatory approvals, opinions from tax counsel and favorable rulings from certain tax jurisdictions regarding the tax-free nature of the transaction to the company and to its shareholders, further due diligence as appropriate, and the filing and effectiveness of appropriate filings with the US Securities and Exchange Commission. The company will provide interim updates as appropriate. There can be no assurances given that the separation of the company’s businesses as described in this announcement will occur.
Murdoch’s letter to staffers:
It is with much enthusiasm and personal pride that I share with you today’s news regarding our plan to drive towards the next, transformative phase of this organisation you and I have built together into one of the largest, most innovative media companies of our time.
That very size and breadth has created an opportunity to separate News Corporation into two global leaders in their own right — we will wow the world as two, as opposed to merely one.
I believe our leadership is born out of a spirit of innovation. We have never accepted the status quo. We have always been driven by the belief that we can do better – deliver a better product for our audiences and provide better performing businesses for our shareholders. Our success has come from our speed, flexibility and creativity in responding to changing markets, in combination with our commitment to serving our customers’ needs.
Our publishing businesses are greatly undervalued by the skeptics. Through this transformation we will unleash their real potential, and be able to better articulate the true value they hold for shareholders. Our aim is to create the most ambitious, well-capitalised and highly motivated publishing company in the world, consisting of the largest collection of our news and publishing brands, as well as our groundbreaking digital education group; we will also work to create the world’s top media and entertainment company, encompassing our premier broadcast and cable networks, leading film and television production studios and highly successful pay-tv businesses.
Much of our foundation already exists – because of you. We have the creative minds. We have the assets. We have the brands. But we must realign and reorganise in this moment of opportunity so that we can heighten our focus and be faster, more nimble, and more adaptable to change. When we began this journey 60 years ago in Adelaide, we made a commitment to provide great journalism, while also entertaining our consumers. In news, information, data, literature, and digital content, no company has devoted the resources, the passion, or enjoyed the success we have. That will not change. The most important guarantee to free societies, free markets and free minds is free speech. Knowledge has changed the course of history in every society, and we believe that being a creator and distributor of information is not just the right thing to do, it’s good business. The failure of other publishing companies to embrace the future has itself created opportunities for us around the world. Our publishing company will deliver on the promise of a well-informed society as we aggressively grow our business across borders and new global platforms.
On the media and entertainment side, we have a reputation for inspiring and entertainingms of imaginations every day. We have a history of empowering truly visionary, creative talent to take chances that have redefined the landscape again and again. Today, our creative content businesses have never been stronger. Our distribution assets, globally, are on full throttle. These businesses, at the core of an independent media and entertainment entity, will innovate and grow even faster.
The most valuable commodities in the world today are information, analysis and education, with infinite potential through the growth of technology and digital platforms to accelerate the improvement of world living standards.
Today there are 30m tablets in use in the US and 75m worldwide. In five years’ time, there will be at least 75m tablets in the US and 375m in the world. Smartphones will get far smarter and grow rapidly over the next 5 years, from 120m active phones to 225m in the US, and from 835m to 1.7bn in the world. These technologies will permeate all parts of life – including education – and it is my firm belief that these two companies will be best positioned to compete in this rapidly evolving global economy and distribute our premium content on these platforms.
Over the years, I have become accustomed to the noise of critics and naysayers…and pretty thick-skinned! Remember what they said when we started the Fox Network, Sky, Fox News and the Sun? These experiences have made me more resilient. And they should you, as well. And time and time again, we persevered, creating new businesses, new products, telling new stories, informing and educating the public in new ways –- and giving jobs to thousands more people.
I am extremely excited by this big change. It is a testimony to our entrepreneurial spirit and determination to educate, inspire and entertainms of families across the globe.
I will personally be leading the creation of our new companies and will serve as chairman of both organisations and as CEO of the media and entertainment company. Chase Carey will continue to partner with me on leading the media and entertainment business, by serving as president and COO. We are busy working on other important details and will inform you as they become available.
Lastly, each of you will make this possible. I will forever be grateful for your loyalty, hard work, creative thinking, and most of all, for your support in making this transition a successful one. We have much work to do as we grasp the great opportunities that lie ahead.
I cannot express how much I appreciate all of your hard work up to this point, and for the promise of your continued creativity as we lay the foundation stones for these two great companies. Each will be unified in their spirit, in their determination, and in their dedication to touching and enhancing lives around the world.