Rupert Murdoch plot to break up his media empire

Facing police questions: James and Rupert Murdoch

26 June 2012

Rupert Murdoch may break up his global media empire as he battles to limit damage from the phone hacking scandal, it was revealed today.

News Corp is examining proposals to split its publishing division, including his damaged UK newspapers, from its highly-profitable entertainment businesses.

Experts said the move could pave the way for a new bid for total control of BSkyB. The £8 billion takeover was scrapped last year amid the furore over the hacking of murdered schoolgirl Milly Dowler’s phone.

It could also be the first step in a sell-off of News International titles The Times, Sunday Times and The Sun. Analyst Peter Esho said: “This is a good way to quarantine the rest of the business from the recent issues.”

The move, announced in Murdoch’s US newspaper The Wall Street Journal, would create a company that includes Mr Murdoch’s British papers with his American titles and book publisher HarperCollins.

The split would see News Corp’s TV and film assets, including 20th Century Fox, Fox News and its controlling stake in BSkyB, hived off as a separate entity.

After a year of unrelenting political and corporate pressure following the News of the World phone-hacking scandal, today’s Wall Street Journal said the 81-year-old media mogul “has recently warmed to the idea”.

The newspaper made clear the Murdoch family would remain in control of the publishing and entertainment divisions. The tycoon’s love of papers is well-known

but investors in his company are more interested in the TV and film businesses, which account for 90 per cent of profits.

The Evening Standard’s media commentator Roy Greenslade: “Phone hacking has unsettled Rupert Murdoch’s control of the News Corp board and made shareholders nervous. The future is no longer entirely under his control.

“The move makes sense in terms of shareholder value. But splitting the company means it could be more difficult to cross-subsidise his loss-making newspapers with profits from TV and film. There is danger ahead for his UK newspapers and it does suggest that down the road, News International will be sold off.”

BBC Business Editor Robert Peston suggested the plans may be an attempt to resurrect the bid for BSkyB.

The takeover, which rivals said would hand the Murdochs an unassailable stranglehold on Britain’s media, was shelved last year after it emerged that the News of the World had allegedly hacked the voicemails of thousands of victims, including the phone of Milly Dowler when she was missing in 2002.

Public disgust led to the closure of the tabloid and led David Cameron to establish the Leveson inquiry to investigate press ethics.

Media regulator Ofcom launched an investigation to establish whether BSkyB, which is 39 per cent owned by News Corp, was a “fit and proper” holder of a broadcasting licence. Mr Murdoch’s son and one-time heir apparent James, 39, was forced to relinquish his chairmanship of the satellite broadcaster but remains on the board.

Mr Murdoch’s proposals to split News Corp caused disquiet at News International’s Wapping HQ because he funds his UK newspaper division with profits from other parts of his empire. A senior source at The Times said staff believe the newspaper will be sold off to private equity within 12 months.

The once all-powerful Murdoch empire has come under unprecedented political pressure since the News of the World scandal. Two of his most senior executives Rebekah Brooks and Andy Coulson have been charged with offences relating to phone-hacking and several News of the World and Sun journalists have been arrested. Mrs Brooks and Mr Coulson deny any wrongdoing.

The split would be a huge personal blow Murdoch, who built News Corp into one of the world’s largest media companies.

He is a fan of newspapers and flew in to London to take charge of the fallout from the phone-hacking scandal and launch a Sunday edition of The Sun.

However News Corp number two, Chase Carey, is thought to be less keen on publishing. Australian shares in News Corp jumped 2.41 per cent today after reports of the split. A News Corp spokesperson declined to comment.

MORE ABOUT

Mergers And Acquisitions

Rupert Murdoch plot to break up his media empire

Read More