Rupert Murdoch's News Corporation has confirmed it is considering splitting its publishing assets – including its scandal-hit UK newspapers – and film and TV businesses into two separately listed public companies.
The restructuring, confirmed on Tuesday following overnight reports in the Wall Street Journal and New York Times, would be the biggest corporate upheaval at News Corp since Murdoch founded the global media company more than 30 years ago.
"News Corporation confirmed today that it is considering a restructuring to separate its business into two distinct publicly traded companies," News Corp said in a statement.
US investors reacted positively, with News Corp's share price rising by about 6%, to just over $21.50, in the hour after the announcement at 9.45am local time in New York.
If Murdoch brings off the move, it would mean the creation of a global publishing business that would comprise News International's UK papers – the Times, Sunday Times and the Sun – the WSJ, the New York Post, The Australian and the book publisher, HarperCollins, according to the WSJ.
The entertainment entity would include the Fox movie, TV studio and TV network businesses, and cable channels such as Fox News, that now represent News Corp's strongest and most profitable parts.
Rich Greenfield, media analyst at BTIG, said it was a "stunning" move. "It's hard not to be very excited about this," he said. He said the newspaper assets were the single biggest reason why investors were avoiding News Corp shares and that even before the hacking scandal investors had been "scared and frustrated" by Murdoch's attachment to News Corp's publishing business. "Rupert Murdoch has been viewed as so wedded to the newspaper assets that he wouldn't even consider separating the company," he said. "This is a significant positive."
According to a source cited by the New York Times, the Murdoch family would be likely to retain control of the newly split companies.
Such a proposal has been aired in the past, and Murdoch has always rejected it.
However, the negative impact of the News of the World phone-hacking scandal has brought the argument about the diminishing importance of newspapers in News Corp's global business to the top of the agenda and provided a focus for shareholder unrest with the Murdoch family's management of the company.
The WSJ, quoting "a person familiar with the situation," states that Murdoch "has recently warmed to the idea".
News Corp's chief operating officer, Chase Carey, said earlier this year that the company's management team had considered a split. But at the time, he said, no decision had been made.
The main reason for the division, even if prompted by the hacking scandal, centres on attempts to improve shareholder value at a time when shareholders have been increasingly critical of the News Corp board.
Many of the company's investors have argued that the company should focus on its more lucrative entertainment assets, which together generated $23.5bn (£15.1bn) in revenue in the year ended in June 2011. The publishing business, by contrast, contributed $8.8bn (£5.6bn).
News Corp's shares have risen 20% over the past 12 months, but some of that ballast has been supplied by an expensive buyback programme.
David Joyce, media analyst at Miller Tabak, said the move would still leave News Corp facing the full consequences of the US government's investigation into the hacking scandal. "I don't think there is anyway that they can legally separate themselves from that," he said. But he said that the move would be welcomed by investors who have long pushed for a split. "The phone hacking scandal has really made this company open up to new ways of thinking. This is a very good move," he said.
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