* Plan is to separate publishing from entertainment -
* No final decision yet - sources
* Shares rise more than 8 pct
* Goldman Sachs, Centerview advising on process - sources
* Plans could be announced on Thursday - CNBC
By Yinka Adegoke and Kate Holton
NEW YORK/LONDON, June 26 Rupert Murdoch's News
Corp took a major step in satisfying shareholders'
concerns for a more growth-focused business with a plan to
separate its publishing and entertainment assets, but an
uncertain management structure for the two proposed companies
raises new questions about a succession plan at the
family-controlled media empire.
Shareholders have been pressing News Corp to get rid of its
troubled newspapers business after a phone hacking scandal
tainted its British newspapers and forced the company to drop
its proposed acquisition of pay-TV group BSkyB. The move
would be a clear signal that the company is distancing itself
from its newspaper roots.
The proposed split into two publicly-traded companies sent
News Corp shares up more than 8 percent, or $1.68, to $21.76 on
Nasdaq -- their highest since 2007. Th e stock plummeted last
year at the height of the hacking scandal, before recovering
this year, helped by a $10 billion share buyback plan.
Several News Corp senior editors and publishers from around
the world met with senior executives on Tuesday at the company's
headquarters in midtown Manhattan to discuss details of the
split, according to a person familiar with the matter. News of
the meeting was first reported by the New York Times.
New Corp has retained investment banks Goldman Sachs and
Blair Ephron's Centerview to handle the split process, according
to people familiar with the plan. The possibility of breaking up
News Corp has been under discussion for a "considerable period
of time" but no final decision has been made, said a source with
knowledge of the situation.
Cable business news network CNBC reported News Corp could
announce details of its plans as soon as Thursday.
In a one-sentence statement, News Corp confirmed news
reports that it is "considering a restructuring to separate its
business into two distinct publicly traded companies." The
conglomerate gave no other details.
Although The Wall Street Journal reported that the Murdoch
family is expected to maintain majority control of both assets,
the proposed split raises fresh questions about who will
ultimately succeed Murdoch, 81, at the helm.
Many investors have said they favor Chief Operating Officer
Chase Carey to take the chief executive job running the
entertainment business, perhaps with Murdoch as chairman.
According to one person familiar with the situation, a move to
separate entertainment and publishing is being championed by
Carey as a way to boost shareholder value.
Murdoch's children Elizabeth and James, both senior News
Corp executives, are expected to stay with the entertainment
James Murdoch has been campaigning for a position to run the
TV operations, said a person close to the company. His older
sister Elizabeth could take a chief operating officer role at
the operations, this person said.
It is less clear who would run the publishing business, with
options including Murdoch himself, the return of his eldest son
Lachlan to an executive role, or Joel Klein, the head of News
Corp's fledgling education business.
ANOTHER TILT AT BSKYB
Analysts believe investors and some management felt
emboldened by the hacking scandal to push for a change.
But Carey as recently as last month said that management and
the board had discussed spinning off the publishing business
following investor pressure but did not have any plans to push
ahead at that time.
Murdoch had earlier opposed a split, and as recently as May
said the group was not considering spinning off its British
newspapers to protect the rest of the empire.
But, according a separate source, "There became a moment
when he started to realize this would be the best way to allow
both businesses to grow in their own way."
The Australian-born Murdoch made his name by buying
newspapers in Australia and then the News of the World, the Sun
and the Times newspapers in Britain, and he talks often about
his love for newspapers and the publishing industry.
London-based analyst Ian Whittaker at Liberum Capital said a
spinoff of the publishing division could enable News Corp to
make another bid for BSkyB once the hacking scandal died down.
"It makes sense, given that the newspaper part has been the
scandal-hit element of the business," he said. "It also suggests
that they may even have another tilt at Sky in the medium term.
I imagine it would be seen as positive by the shareholders
outside of the family."
News Corp pulled its $12 billion bid for the 61 percent of
BSkyB it did not already own last July, after public outrage
sparked by the admission that staff at the News of the World
tabloid had repeatedly hacked into phones to source salacious
LUCRATIVE ENTERTAINMENT UNIT
News Corp's film and television businesses include the 20th
Century Fox film studio, Fox broadcasting network and Fox News
channel. The entertainment business, which generated revenues of
$23.5 billion in the year to June 2011, would dwarf the
publishing unit, which posted $8.8 billion in revenue.
The publishing division includes the HarperCollins book
publisher, the education arm headed by Klein, and newspapers
including The Wall Street Journal, the Times of London, the Sun,
the New York Post and The Australian.
Publishing, including integrated marketing services,
accounts for around 7 percent of News Corp's enterprise value,
according to analysts at Barclays Capital. It estimates that
publishing represents 24 percent of revenues and around 11
percent of operating income.
Analysts estimate that an independent publishing division
would generate about $1.3 billion in EBITDA at a multiple
valuation of 6 times, or $3.25 per share. They expect a
standalone entertainment unit to be valued at $52 billion, or
$23 per share, based on an 8 times cash flow multiple.
News Corp's 39 percent stake in BSkyB came under scrutiny in
the spring after a British parliamentary committee questioned
whether Murdoch was "fit and proper" to run the business.
British regulator Ofcom is currently deliberating that point
among others and is due to make a decision in coming weeks.
"It's about Ofcom deciding whether the company is fit and
proper to hold a broadcast license," said Canaccord Genuity
analyst Thomas Eagan. "This split would help ameliorate those
The hacking scandal reverberated throughout the wider New
York-based media conglomerate and disrupted what was thought to
have been a smooth plan for Murdoch to be succeeded as CEO by
his youngest son, James.
It has also revealed the close relationships in Britain
between the government and News Corp executives. Police have
arrested over 50 News Corp staff and public officials while the
former head of the British newspaper division Rebekah Brooks, a
close confidante to Murdoch, is awaiting a trial for interfering
with the police investigation.