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Directors of News Corp were meeting in New York on Wednesday afternoon to approve a proposal to split Rupert Murdoch’s $50bn empire in two, with expectations growing of an announcement as early as Thursday morning.
“There have been no decisions and they are simply discussing options,” one person with knowledge of the board meeting cautioned. Another said an announcement confirming details of the split was likely on Thursday “unless something goes off track”.
Shares in the multinational media group closed up a further 2.5 per cent at $22.31 in New York, their highest point since News Corp completed its $5.7bn acquisition of Dow Jones in 2007.
On Tuesday, the stock rose 8.3 per cent after the company confirmed in a brief statement that it was considering separating publishing businesses such as The Times, The Wall Street Journal and The Australian from the Fox, Sky and Star television and film brands.
News Corp is understood to be working with bankers at Centerview Partners, Goldman Sachs and JPMorgan Chase and lawyers at Skadden Arps.
Completing a separation could take a year, people familiar with the company said. Among items expected to be discussed at Wednesday’s meeting was how to allocate the group’s cash and debt between two divisions with very different profits and growth prospects, people familiar with the meeting said.
Ken Doctor, a news industry analyst at Outsell, said falling newspaper revenues made it likely that the entertainment company would retain all or most of News Corp’s debt, leaving the publishing company debt-free.
“It’s common for the struggling spin-offs in these media company separations to be set up without debt, to give them a better chance at resetting themselves,” he said.
Benjamin Swinburne, a Morgan Stanley media analyst, estimated that the publishing company would have no debt and $2bn of cash, leaving $15.5bn of debt and $8.3bn of cash in the residual entertainment company.
Richard Greenfield of BTIG predicted that News Corp would put $1.5bn of debt and $1bn of cash into the publishing company, and raised his target for News Corp’s shares from $24 to $30.
Another issue to resolve is how to deal with possible future penalties and legal bills stemming from the investigations on both sides of the Atlantic into phone hacking and other practices at News Corp’s UK newspaper business that led it to close the News of the World tabloid title in July last year.
People briefed on News Corp’s discussions said they expected future liabilities to be “ringfenced” before the spin-off.
The future leadership of the two companies remains unclear, although people familiar with the company said they expected Mr Murdoch to lead each one as executive chairman or chairman and chief executive.
They added that Lachlan, Mr Murdoch’s older son, currently chairman of Ten Network Holdings in Australia, could in time take a senior executive role in the publishing company.
Additional reporting by David Gelles in New York