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News Corp shares hit five-year high as board considers split

Category : Business

Analysts back plan to divide Murdoch group into entertainment and publishing companies as investors push for more change

News Corporation’s share price has risen to a five-year high of just over $22 on the back of the proposed plan to split its entertainment and publishing businesses into two separate publicly listed companies.

The company’s share price was up 1% in early trading in New York on Wednesday morning, reaching $22.13, a price last seen in November 2007.

New York analyst Laura Martin, of Needham & Co, on Wednesday said in a research note that the proposed split, which is being discussed at a board meeting at News Corp’s headquarters in the city, could add “approximately $5 per share of value” for investors. Martin upgraded her News Corp stock rating from “hold” to “buy”.

“Although the company will not say a split limits litigation risk, we believe if the company were split into two corporate entities, it would be harder for any litigation settlement to come out of the entertainment assets, including the crown jewels Fox News and Fox broadcast network and stations,” she said. “We also believe that any future costs of legal investigations would accrue to the print entity, freeing up the entertainment entity to grow earnings unhindered by these expenses.”

News Corp’s share price rose by 8% on Tuesday following confirmation that the split was being considered, giving investors who have long hoped for a sell-off of News Corp’s newspaper titles hope that their stock would rise further upon the demerger.

Part of the rise is due to a $10bn share buyback programme, meant to appease unhappy investors. But the company’s star assets, the 20th Century Fox movie and TV studio, the Fox TV network, and cable channels including Fox News, FX, Fox Sports and Fox Business News, have also performed well and more than compensated for the less stellar performance of its newspapers.

Shareholders are still pushing for more change at the company. Chairman and chief executive Rupert Murdoch’s handling of the News of the World phone-hacking scandal disillusioned investors to the extent that a majority of independent shareholders voted against key members of his board at last year’s annual general meeting. They also lobbied for an independent shareholder to replace Murdoch.

Speaking anonymously, one shareholder said they would want to see a more autonomous board at the new entertainment company. “We have no problem with Chase Carey [News Corp chief operating officer], he acts in the interest of shareholders. But Rupert has shown that he is prepared to put his own interests first time and again through this scandal. He’s a great man but we need a balance,” he said.

The shareholder said he was less interested in taking shares in the newly listed publishing company but that the appointment of a Murdoch to run the firm would be “another sell signal, should we need one”. Rupert’s eldest son Lachlan has been tipped to run the publishing side of the business.

The phone-hacking scandal initially hit News Corp’s shares hard but the company has added $5bn in value since July last year when the Guardian first broke the news that News of the World reporters had hacked into the phone of murdered schoolgirl Milly Dowler.

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