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News Corp. publishing firm to start with $2.6 billion in cash

March 08, 2013|By Meg James
  • News Corp. Chairman Rupert Murdoch and wife Wendi Deng Murdoch arrive at last month's Academy Awards in Los Angeles.
News Corp. Chairman Rupert Murdoch and wife Wendi Deng Murdoch arrive at… (John Shearer / Invision…)

News Corp.'s soon-to-be publishing company will begin life with no debt and about $2.6 billion in cash -- illustrating the parent company's attempt to provide the new entity with solid financials and money for acquisitions.

The new company, which will carry the News Corp. name when it is inaugurated this summer, will include the Wall Street Journal, Barron's, the New York Post, the Times of London, HarperCollins book publishing and an educational materials division called Amplify.

The assets have a combined value of $18.6 billion, according to a regulatory filing on Friday.

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To get started, the new publishing arm will get an infusion of about $1.8 billion from the parent company. News Corp.'s remaining -- and more lucrative -- television properties and movie studio will be branded Fox Group. That company is expected to shoulder the company's current debt load of $16.5 billion.

Rupert Murdoch will be chairman of both companies, and also serve as chief executive of Fox Group. Former Wall Street Journal managing editor Robert Thomson, like Murdoch a native of Australia, has been promoted to chief executive of the publishing company.

Murdoch has long said the new publishing company would have the financial resources to survive and thrive at a time when the publishing industry has been weakened by readers and advertisers migrating to the Internet and mobile devices. Newspaper revenues have plummeted in recent years.

Still, the 81-year-old media baron is betting that companies that produce quality content will continue to prosper.

"Our strong balance sheet provides us with the financial flexibility to continue our development of premium content, make investments across our businesses to maintain our leadership position amidst the continuing digital evolution," News Corp. said in the filing. 

The company said it intended to throw capital "towards investments in higher growth initiatives, and take advantage of strategic opportunities, including potential acquisitions, across the range of the media categories in which we operate."

News Corp. executives refuse to hint at what acquisitions they would like to make, although Murdoch is believed to be interested in the Los Angeles Times and in bulking up the company's book publishing business. 

The Times' parent company, Tribune Co., emerged from bankruptcy on Dec. 31. This month, it hired investment bankers to shop for buyers for its newspapers.

For the fiscal year ended June 30, 2012, News Corp.'s publishing arm generated revenue of $8.7 billion. Of that, approximately 41% was generated in the U.S., 20% in Britain and 32% in Australia.

During the same period, the publishing group recorded a net loss of $2 billion, primarily from non-cash impairment charges.

Murdoch will control shares amounting to 39.4% of the new company. Saudi Arabian Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud will control 7%.

The filing also reminded investors that News Corp. continues to mop up the damage from the disastrous phone-hacking scandal at its tabloids in Britain. The company said it has spent about $200 million in the past two years for legal fees and civil settlements.  The new entity will set aside an additional $70 million for other claims.


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