“We’ve come a long way in our journey that began almost 60 years ago with a single newspaper operating out of Adelaide (Australia),” Murdoch said in the conference call. “I’m convinced that each of these new companies would have the potential to continue that journey and prosper as independent entities long into the future.”
The move, which has been under consideration for a year, comes after much bad publicity for Murdoch over the phone-hacking scandal at his News of the World tabloid in the United Kingdom. News Corp. executives maintain that the aftermath of the scandal had no impact on this decision, with Murdoch himself stating, “It’s not a reaction to anything in Britain.”
The Murdoch family controls nearly 40 percent of the voting shares in News Corp. and is expected to keep control of both companies. Murdoch, 81, will serve as chairman of both companies and CEO of the media and entertainment company. Chase Carey, the current COO of News Corp., will serve as its president and chief operating officer.
News Corp. said it plans to assemble management teams and boards for both companies over the next several months.
The split will create a separate entity for News Corp.’s newspaper and publishing arm, which includes the Wall Street Journal, New York Post, and Harper Collins publishing, and another one for its more lucrative entertainment group, which includes the 20th Century Fox movie studio, the Fox broadcast TV network, and the FX and Fox News cable channels.
Under the plan, News Corp. shareholders will receive one share of common stock in each new company for each share of News Corp that they hold. Each company will maintain two classes of stock. The $54 billion media conglomerate’s stock has outperformed other media giants this year such as Viacom and Time Warner but has lagged behind Disney and CBS, which are more traditional media companies with respect to film and television.
Murdoch formed News Corp. in 1979 as a holding company for News Limited, which he created from the assets he inherited in 1952 following the death of his father, Sir Keith Murdoch, and subsequent expansion. In 1981 News Corp. bought half of 20th Century Fox, buying the other half in 1984. In 1985 News Corp. announced it was buying the Metromedia group of stations, setting the stage for the launch of a fourth commercial broadcasting television network in the United States. Murdoch became a naturalized citizen in 1985 to satisfy the legal requirement that only U.S. citizens could own American television stations. In 1986 the Metromedia deal closed, and the Fox Broadcasting Company was launched.