News Corp

News Corp gets tepid response from investors after split

PUBLISHED : Tuesday, 02 July, 2013, 11:44am
UPDATED : Tuesday, 02 July, 2013, 11:44am

News Corp shares slipped when the company began trading separately from the 21st Century Fox entertainment operation, as investors gave a tepid reception to the slower-growing publishing business.

The new News Corp, which includes publishing assets, such as The Wall Street Journal and HarperCollins, and an education division, gave up its earlier gains on Monday, and its shares fell 2 per cent to US$14.95. It has a market value of about US$9 billion.

That compares with British education publisher Pearson , whose market value is US$14.6 billion, and newspaper and broadcast company Gannett Co at US$5.5 billion.

“News Corp is largely seen as ink on paper, and the perception is that the good assets, so to speak, went to Fox,” said Gabelli & Co analyst Barry Lucas.

Shares of 21st Century Fox, which includes the Fox cable network and the 20th Century Fox movie studio, were up 2.1 per cent at US$29.37 on Monday, giving the company a market value of about US$68 billion.

Evercore Partners analyst Alan Gould called the new Fox company one of the fastest-growing entertainment conglomerates. In a note to investors on Monday, he gave the stock an “overweight” rating and a US$34 price target.

Rupert Murdoch, who controls and is chairman of both companies, last summer announced his plans to split his empire, bowing to some large shareholders who had long called for News Corp to shed its slower-growth newspaper assets.

The pressure to split had intensified after a phone-hacking scandal that involved News Corp’s British tabloid newspapers. It sent shares of the company tumbling in the summer of 2011 and thwarted its deal to buy the rest of pay TV service BSkyB .

Murdoch was effusive about prospects for News Corp when he met investors in May: “I have been given an extraordinary opportunity most people never get in their lifetime: the chance to do it all over again.”

Still, the new publishing company will test investors’ appetite for print assets.

At News Corp, news and information make up the majority of revenue and earnings before interest, taxes, depreciation and amortization.

While the company also has pay TV assets and an equity stake in a real estate classified site in Australia, it is coming out as a separately traded company when advertisers are putting their dollars in digital products and other places besides newspapers.

Although News Corp, like other publishers, has digital media, advertising there commands lower prices than traditional print publications.

News Corp said in May that it would write down the value of its Australian and US publishing assets by up to $1.4 billion.

Shareholders of the old News Corp received one share in the new publishing company for every four shares in what is now 21st Century Fox.