Peter Kafka

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News Corp. Explains Its Big Split

News Corp. has officially announced its impending divorce from itself. Now some of its executives will field a few questions from investors (but not reporters). I’ll be liveblogging at least part of the proceedings, below:

Good morning. We’re live.

Here’s Rupert: “Today’s a very exciting day for News Corp. And one of great pride for me, personally.”

We’ve been working on this plan for three years (except that I’ve been rejecting it for almost all of that time).

(Apologies, had to correct earlier post: Murdoch will be chairman of both companies, post-split, and CEO of entertainment company. He hasn’t announced a role for himself in the publishing company — but, obviously, he’ll be intensely involved, regardless of title.)

Murdoch walking through previous memos, with basics of the split.

Both of these companies are awesome. And the split will make them more awesome: More flexible, more “nimble” (uses that term multiple times), will uncover value, etc.

“Subject to final board and shareholder approval” (J/K! I control all of that, so we’re only stopping this if I say so.)

Hey, don’t freak out about the publishing business. It’s going to have a very strong balance sheet with “robust cash position.”

Q&A:

Q: You said you’ve considered this for years. Why now?

Murdoch: “I looked around, I’ve seen other companies that have split up, and they’ve certainly done well for other shareholders … it’s a very big move and a very big decision for me … it’s very important to say, this is not a fait accompli. There are a lot of steps to take.”

Q: We think the publishing industry is in decline. Why do you think publishing can grow? And for CFO Dave DeVoe — can you keep buying back stock during the split?

Murdoch: “Digital.” People are still buying paper, but they’re now buying bits, too. I’ve been pushing the idea that people will pay for news for a couple years. And we’ve been charging for news online. “We’re going to push them a lot harder, and improve them greatly.”

DeVoe: No impact on buybacks.

Murdoch: Well, maybe a moderate slowdown in buybacks.

Q: You talked about “robust net cash position” after spinoff. What will financial structures look like after spin?

DeVoe: Stay tuned.

Q: How does capex, other stuff get split?

Qs about amortization, etc. This question confuses DeVoe.

Q: You talked about strategic opps for both companies. Any specifics?

Chase Carey: Nah. Just a generalization.

Q: Hey what about BSkyB?

Carey: No changes there.

Q: Looks like the publishing business is sort of an Australian business now. So who’s going to run that? (Maybe a Murdoch son who lives there now?)

Murdoch: We have a wonderful group of managers in the whole company. “This will take many months to complete, and we’re in no hurry to make a decision on that.”

Q: You said this thing wasn’t a done deal. What are the hurdles?

Murdoch: “Oh, I don’t know. Lawyers.”

I’d like this to go faster than 12 months, but I’ve been told I have no chance. It took McGraw-Hill a long time; Kraft, too. “There’s just a lot of hurdles you have to go over”

Q: Will this help you out in the U.K.?

A: Murdoch “We’re not doing this in any sense as a reaction to the U.K. … it is not a reaction to anything in Britain.”

[Missed a Q, apologies]

Q: You’ve had print news and TV news assets for a long time. Why are you splitting them up? Why can’t you make them synergistic?

Carey: I disagree. [Unstated -- if you think Roger Ailes and Fox News are going to work The Wall Street Journal or any other News Corp. print business, you should go lie down, because you are very, very drunk.]

Q: But seriously, why can’t news teams for print work with news teams for TV?

Carey: [Seriously. You're high.]

Q: You’ve said spinoff will be 1:1. Any chance that changes?

Murdoch: We didn’t say that.

DeVoe: Actually, we did. But it could change over time.

Q: More on capitalization for publishing company. Most publishing companies are levered up. Sounds like you’ll stuff this thing full of cash, though. Why?

Carey: Not going into details. But “we’ve got unique businesses.”

Q: So will there be any synergy between the two separate companies?

Murdoch: Not really.

Carey: They can still work together, but at arm’s length.

Q: Will these companies trade on both American and Australian exchanges? Also, aren’t these two companies going to compete with each other?

Carey: Basically, these companies will be mirrors of News Corp. today re: trading. As far as competition: Each company is going to do their own thing.

And we’re done. Thanks for reading. More later, obviously.


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