News Corp break-up looks smart: analyst
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AAP
2012-08-09
News Corporation's smaller annual profit would appear to show the separation of its underperforming newspaper publishing assets from the rest of the business can't come soon enough.
The profits for cable television and films soared while they equally plunged in publishing, with the value of the newspapers written down by almost $US3 billion ($A2.85 billion).
That led to a fourth quarter loss of $US1.6 billion ($A1.52 billion) and annual profit for the year to June 30 of $US1.2 billion ($A1.14 billion), down from $US2.7 billion ($A2.57 billion).
The writedowns were made as News prepares to split its struggling newspaper businesses from the more profitable TV and movies arm.
While Rupert Murdoch and senior management insist they want to stay in newspapers, they might not have a choice, according to Fusion Strategy media analyst Steve Allen.
If the share price of other media publishing companies Fairfax, APN and Seven West Media is a guide, then the new listed News Corporation publishing entity will be low and undervalued to its book value.
"You're going to get takeover merchants, such as venture capitalists, having a real good look for a takeover," he told AAP.
Shareholder agitation has forced the break-up due to the poor performance and margins of the publishing assets.
The current shareholder structure involving voting and non-voting shares allows the Murdoch family to avoid a takeover but Mr Allen said major shareholders would not allow such a structure to be set up after a split.
IG Markets strategist Chris Weston said he thought the new publishing company would require a lot of capital to trade as a "dividend play" with a strong dividend attached to make it compelling.
Greg Roberts
