LOS ANGELES — Rupert Murdoch's News Corp. said Thursday that its board has approved a plan to split into two companies, one containing struggling newspaper and book publishing businesses and the other comprising faster-growing entertainment operations.
Murdoch will serve as chairman of both new companies and CEO of the entertainment company. The Murdoch family, which controls nearly 40 percent of the voting shares in News Corp., is expected to maintain control of both companies.
News Corp.'s board unanimously approved the split in principle. It will take a more formal look at the details in coming months. The separation is also subject to regulatory approval and is expected to take about a year.
The split of News Corp. is a symbolic turning point for Murdoch, the company's 81-year-old CEO. Through the years, Murdoch maintained a fondness for newspapers even as he purchased entertainment companies and built a media conglomerate with a market value of $53 billion. In hearings last summer before U.K. lawmakers, he conceded that he regularly called newspaper editors under his employ with the greeting: "What's doing?"
Investors have already applauded the change. Since news of the split broke early Tuesday, News Corp. shares are up 9 percent. They slipped 32 cents, or 1.4 percent, to $21.99 on Thursday.
News Corp. said existing shareholders will get one share of stock in the publishing company for every News Corp. share they own. The exact ratio could change. Each company would maintain two classes of stock, voting shares and nonvoting shares.
Murdoch is hoping the television and movie company will be more highly valued by shareholders who hadn't been unwilling to accept the dour growth prospects of the newspaper and book business.
But he now faces the challenge of making the publishing division attractive enough for new investors. Taken as a whole, News Corp.'s entertainment businesses are much more promising. In the nine months through March, the combined cable channel, TV station, satellite TV and movie businesses saw revenue rise 9 percent to $18.66 billion. Operating profit rose 23 percent to $4.17 billion.
By contrast, the publishing arm's revenues and profits have been shrinking over the same period. Revenues declined 4 percent to $6.22 billion while operating profits slipped 22 percent to $458 million.
Companies that once spent money for newspaper advertisements have been flocking to the Internet in search of cheaper ad space. Print newspaper subscriptions continue to fall. Meanwhile, newspapers' digital subscriptions and ads have been slow to make up for the decline.
"News has been reduced to being a minor part of what we now think of as media," said newspaper analyst Ken Doctor, writer of the Newsonomics blog. "News needs to be thought of differently and, in a sense, subsidized."
Investors have long pestered News Corp. to get rid of the struggling newspaper business. Murdoch acknowledged Thursday that the idea has been discussed internally for more than three years.
How the split will work
Newspapers, book publishing and information services such as Dow Jones Newswires will be part of the publishing company. The 20th Century Fox movie studio, the Fox broadcast TV network and the Fox News channel will be part of the media and entertainment company.
Shareholders will get a share in each company for every share of News Corp. they now own. That ratio may change by the time the plan is finalized. Both companies will trade publicly, under different stock tickers.
Rupert Murdoch will be chairman of both companies and CEO of the media and entertainment company. The company did not name a CEO for the publishing business.
News Corp.'s board unanimously approved the split, but it will need to approve a more formal proposal. The deal is also subject to shareholder and numerous regulatory approvals.
News Corp. plans to hold a special meeting of its shareholders in the first half of 2013 and expects the deal to be completed in about a year.
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