Jotters dive into the questions surrounding News Corp's strategic cleft, pointing to a variety of possible repercussions.

It appears that media mogul Rupert Murdoch and his fellow News Corp directors have been contemplating splitting the company up for most of June. An announcement is expected as early as this morning, so we’ve tried to select the analysis that keeps a broader perspective of what’s led to this potential shift. The three big questions are as follows. How does this fit with News Limited’s strategy? Has chief operating officer Chase Carey grown too much in stature for Murdoch to ignore for his own children? And why is it that Murdoch has now apparently warmed to an idea that’s he’s firmly dismissed for years?

Fairfax’s Malcolm Maiden brings us word about just when the upper echelons of News Corp started thinking about a move that shareholders have been demanding for years.

"The breakup of News Corp into two groups, one owning its television and movie assets and the other owning its newspapers, book publishing and other media businesses was discussed at length earlier this month at a four-day board conference that began in Milan and then moved to Rome. It was an idea that had been circulating inside News for years, but a shift by News’s founder, Rupert Murdoch, towards the idea at those meetings appears to have been decisive. The board meeting that has been called for 5pm on Wednesday in News’s sixth Avenue headquarters in New York – 7am tomorrow, eastern Australian time – is not a scheduled one, and has been called specifically to consider the reorganisation, and vote on it.”

The Australian Financial Review’s Neil Chenoweth points out that the timing of News Limited’s new strategy fits very awkwardly with the apparently counter-acting strategy at News Corp’s head office in New York.

"It was that strategy, based on a $1.97 billion takeover bid for CMH, that Williams took to Las Vegas last month to pitch to Rupert Murdoch and News Corp’s chief operating officer Chase Carey. Days before, on May 18, Murdoch had said any suggestion that News planned to spin off its newspapers was "wholly inaccurate. Publishing is a core component of our future.” The first clue that the game had changed came on Tuesday, June 19, Sydney time when Joel Klein quietly stepped back from running News’s management and standards committee, which had been assisting British police in the phone hacking investigations, to focus on running News’s education division, the only growth prospect in the planned publishing spin-off. But if Klein’s move foreshadowed this week’s plans to split News, did Williams know?”

Business Spectator’s Stephen Bartholomeusz says Murdoch remains the clearly dominant figure within News Corp. However, there’s been a subtle but unmistakable shift towards chief operating officer Chase Carey.

"That may have occurred anyway – Murdoch isn’t getting any younger – but the UK hacking scandal and the distractions, costs and reputational damage associated with it appears to have expedited the elevation of the highly-regarded Carey into a more powerful and more public position within News. It is no secret that News’ US executives aren’t as keen on newspapers as Murdoch, who built his empire on them and retains a passion for them despite their decline into near-irrelevance within News as it has built its vast global film and television operations. News’ shareholders are also unenthusiastic about the combination of businesses within the group. The News of the World scandal, which destroyed News’ ambition of acquiring BSkyB in the UK, would have intensified the debate about keeping the newspapers, already confronted with severe structural challenges, next to those golden assets.”

And Business Spectator’s Breakfast Deals columnist, Alexander Liddington-Cox, suspects that there could be a hidden agenda behind Murdoch’s sudden change of heart.

"One thing’s for sure, Murdoch would not be 'warming' to this proposal, as reported by the Wall Street Journal, without assurance that it would at least maintain and possibly enhance his family’s control over the company. Share price appreciation has never been his main priority. The question is, what is the catalyst that’s shifted Murdoch’s thinking? Some have pointed to the growing prominence of chief operating officer Chase Carey. Perhaps the increasingly visible News executive has managed to sway the octogenarian... Others have suggested that this could be related to the diminished influence of Murdoch’s once most likely successor, his son James, thanks to the News of the World scandal, and the lack of a credible enough case to elevate his other son Lachlan or daughter Elisabeth to the top job. Basically, split the company to satisfy the register, buying time to select a successor. Nevertheless, this could prove to be the last big move that Murdoch can do to secure the ongoing influence of his family as well as his own legacy as a media executive.”

Meanwhile, The Australian Financial Review’s Chanticleer columnist, Tony Boyd, says the writing is on the wall at Boral.

"After copping the third profit downgrade in about a year, shareholders in building materials group Boral must be coming to the realisation that this iconic Australian company is not suited to the times. It is now clear that the company’s problems are so deep-seated and so far-reaching that not even the appointment by the board of a superman chief executive to replace Mark Selway can save shareholders from more pain. Building materials companies such as Boral that are set up as international conglomerates with no specialist high-margin products will suffer when the United States economy remains in a slow, grinding recovery, when housing affordability in Australia is too high, and social trends lean towards renting in medium density close to a central business district rather than living in detached houses on the outskirts of cities."

Still on Boral, The Australian’s John Durie says serious questions now have to be asked of chairman Bob Every, having presided over two profit downgrades in a matter of months.

"Batstone said the weather had delayed projects rather than cancelling them, but that remains to be seen. Boral, a building products conglomerate, will always be held up against James Hardie as a pure fibre cement house and rarely seen in a positive light. But that could change when external conditions improve. It is headed for its worst result since its split in 2001, after its second downgrade in two months because of prolonged wet weather and weak demand in the US and locally.”

Back on the News Corp decision, Fairfax’s Malcolm Maiden looks at the sheer upheaval – a word that’s been employed by many commentators – in the media industry.

In other media news, Fairfax’s Elizabeth Knight looks at the escalating battle between the chairman of her company, Roger Corbett, and mining billionaire Gina Rinehart. The columnist writes that Rinehart might have the money but Corbett has the support of the register in the form of 'editorial independence' believers, or parties that want Rinehart’s blocking stake gone for a potential takeover.

Speaking of Rinehart, The Australian’s Barry Fitzgerald says the mining billionaire is likely to have lost her position as world’s richest woman thanks to the decline in coal and iron ore prices.

In other billionaire-related news, Fairfax’s Insider columnist, Ian McIlwraith, finds billionaire Clive Palmer fronting the Takeovers Panel over an acquisition of timeshare investments at his Coolum resort. The columnist also made a correction to a previous piece, something that The Distillery applauds.

Elsewhere, The Australian’s Rowan Callick finds Australian banks starting to position themselves for a greater share of global Islamic finance, while The Australian’s Robin Bromby looks at the unusual level of uncertainty in the commodity markets.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles