Billionaires unlock the value
Wednesday, June 27, 2012/
What a difference a year makes. About 12 months ago, with the News Corporation hacking furore firing up and Rupert Murdoch under pressure to defend the performance of his newspaper empire, he described suggestions that News could spin off its print division as “rubbish”.
But overnight, News has confirmed that it is considering a demerger proposal that would see News split its print businesses (that is, the newspaper subsidiaries) and its film and television businesses into two separate publicly-listed vehicles.
In one business, you’d have the company’s Australian newspapers (including The Australian and the metro tabloids), its British newspapers (including The Times and The Sun), it’s American newspapers (including The Wall Street Journal and the New York Post) and its book publishing interests (most notably Harper Collins).
In the other business, you would have the company’s film, television and entertainment businesses, including the Fox movie studios, Fox Broadcasting and the Fox Network in the US, and presumably Foxtel in Australia.
It’s a move that solves so many issues for News. By spinning off the publishing division, News will be able to both quarantine its struggling newspaper businesses and show off the true value of its film and TV division.
The demerger would also allow Rupert Murdoch to dodge succession issues. News Corp’s chief operating officer Chase Carey slips naturally into the role of CEO of the film and TV division, while Rupert and then James Murdoch would be the natural heads of the publishing business.
Whether Rupert Murdoch would be thrilled to see the heart of his empire ripped in two is another question. As Murdoch biographer Michael Wolff says, this must be one of the most humbling days of Murdoch’s career.
But surely he would see the logic behind the move. And, if he doesn’t, the fact that News Corp shares rose 8.3% last night – boosting the company’s market capitalisation by $1.3 billion – should bring a little solace.
This move is all about unlocking value for News Corp and Murdoch.
The big question about how much value is in the publishing business is a difficult one to answer. Wolff makes the somewhat rubbery estimate that the newspapers could be losing as much as $250 million a year. There is a strong argument to make that by letting the entertainment business stand on its own, away from any hacking scandals or succession issues, its value will increase sharply.
Today’s share price rise suggests investors agree.
Another billionaire unlocking value is James Packer. He sees value to be extracted from selling his pay TV interest – at what a number of commentators believe is the top of the market – and pumping money into his expanding casino interests.
Next stop on the Packer casino express is the Philippines, where there are plans for a $1 billion casino on an island off Manilla. Packer’s joint venture vehicle Melco, through which he owns casinos in Macau with gambling tycoon Lawrence Ho, who is behind the push that will see Melco team up with Henry Sy, the richest man in the Philippines.
It looks to be another smart move by Packer and a further reshaping of his empire.
Packer and Murdoch have arrived at crucial points in the history of their empires, where the old cornerstones of their wealth – newspapers for Murdoch and television for Packer – are being replaced.
The shift has been taking place for some time. But it’s funny how, all of a sudden, in the space of a week, these examples of empire remaking have become so clear.