News Corp…spinoff with a twist

I’ve been thinking…Months before the Time Inc. spinoff was announced, Robert Murdoch’s News Corp was well underway to spinoff its publishing assets, which include such name brands as The Wall Street Journal, The Times of London and book publisher HarperCollins.  A recent SEC filing valued the spinoff’s assets at some $18.0 billion.

Details of the deal reflect a spinoff transaction with a twist.

The spinoff entity will retain the News Corp name, while the remaining entertainment businesses, including 20^th Century Fox, Fox Films, Fox Broadcasting and Fox News, will conveniently be named the Fox Group.  The “new” News Corp will also start off with over $2.5 billion in cash, no debt and Robert Thomson as CEO.  Thomson is proven publishing executive, including stints as Managing Editor of The Wall Street Journal and Editor of The Times of London.  The Fox Group will also indemnify the spinoff from any potential losses from the London hacking fiasco currently facing News Corp.

Clearly, the new News Corp will begin its public life extraordinarily ready for battles it will surely wage.  And to succeed in the print media business, the new News Corp will need to leverage every advantage…and then some.  The print media business has been dealing with long term and accelerating trends of declining revenues and readers…a deadly cocktail that is debilitating to all players in the business.

It’s no surprise that both News Corp and Time Warner are opting to spinoff these businesses.  In addition, the Tribune Company, the Chicago-based media group that owns the LA Times and the Chicago Tribune, recently emerged from a contentious and extended Chapter 11 proceeding and now faces the prospect of spinning off its extensive print media assets from its other digital and broadcast businesses.

Competition for dwindling print media revenues and readers is destined to get even tougher.  Ouch!

Keep an eye on the new News Corp, the spinoff with a twist.  It will have the financial firepower of lots of cash, the ability to lever up and the currency of its soon-to-be publicly traded shares to make whatever acquisitions CEO Thomson and his team can devise.  What will be devilishly difficult is crafting strategies that address the realities of sickeningly shrinking markets in an era of unrelentingly rapid technological change.