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News Corp. Announces Plan to Split TV, Film Assets

Updated 4 p.m. ET

Rupert Murdoch's News Corp. said Thursday that it intends to
create two distinct publicly-traded companies, one that would hold its media
and entertainment assets and another that would contain its publishing and
digital education group.

The decision had been expected and drove the price of News
Corp. stock up 8% on Tuesday. After the deal was formally announced Thursday,
News Corp. stock fell almost a point as there was little new information from
the company and the market was down overall.

News Corp. said the move would give each company
"enhanced strategic alignment and increased operational flexibility."
The move had been under consideration for three years, and the company's board
authorized management to explore the separation after a meeting Wednesday. Both
companies would still be controlled by Murdoch, who would be chairman of both.

"There is much work to be done, but our board and I believe that this new
corporate structure we are pursuing would accelerate News Corporation's
businesses to grow to new heights, and enable each company and its divisions to
recognize their full potential -- and unlock even greater long-term shareholder
value," said Murdoch, chairman and CEO, News Corp., in a statement.

"We recognize that over the years, News Corporation's broad collection of
assets have become increasingly complex. We determined that creating this new
structure would simplify operations and greater align strategic priorities,
enabling each company to better deliver on our commitments to consumers across
the globe," said Murdoch, who had reportedly resisted splitting up the
company in the past. "I am 100% committed to the future of both the
publishing and media and entertainment businesses and, if the board ultimately
approves a separation, I would serve as chairman of both companies."

Murdoch would also be CEO of the media and entertainment company. Chase Carey
would be president and COO of the media and entertainment company. No CEO was
designated for the publishing company.

In a conference call with analysts, Murdoch said that a key
reason he decided to go with the new structure was because "each entity will be
better managed and more easily managed."

Murdoch started News Corp. with a single newspaper in
Adelaide, Australia, and his continued fascination with publishing -- propping
up the money-losing New York Post and
spending billions on Wall Street Journal
publisher Dow Jones -- has frustrated analysts who believe the print business
has been a drag on the company's growth.

But Murdoch said that publishing is a good business. "No
doubt there will be those naysayers who see the announcement as some sort of
indication of concern about the long-term potential of the publishing industry
or of our franchises specifically. That could not be further from the truth,"
he said during the conference call.

"I believe that a well-capitalized, well-run scale player on
this stage can thrive like at no time before," he said.

Murdoch said he sees opportunities in digital and getting
readers to pay for online content.  "People
aren't buying pure papers printed on crushed wood, but they are equally getting
their news in many other forms. I think I took a strong lead a couple of years
ago -- a year ago at least -- and said people will pay for news. That it is the
most valuable commodity in the world. As the world gets more complicated people
need to know what's going on."

News Corp. has a black eye now because of its newspaper
business in the U.K., where it is embroiled in a phone hacking scandal. The
scandal has led to the closing of the tabloid News of the World, the departure and arrest of several senior
executives and the withdrawal of a bid to acquire the stake in British Sky
Broadcasting that it doesn't already own. A government report on the phone
hacking scandal raised questions about whether Murdoch was "fit" to run a major
media company.

But Murdoch insisted the decision to split the company had
nothing to do with the scandal. "It is not a reaction to anything in Britain,"
he said.

News Corp. stock has risen since the scandal began, in part
because it has prevented News Corp. from making acquisitions and because the
company has embarked on a massive stock buyback campaign.

The company said the buyback would continue, but might slow
a bit as the company weighs its capital needs.

Analysts continued to be positive about splitting up News

"We believe that the spinoff will reduce the conglomerate
discount in the stock and could potentially help ring-fence liabilities
associated with the ongoing hacking investigation," said Anthony DiClemente of
Barclays Capital.

"We believe that [Thursday's] announcement, coupled with
strong buybacks and double-digit EBIT growth, makes News Corp. one of the most
attractive media stocks in our coverage universe," said Michael Nathanson of
Nomura Securities, who reiterate buy recommendation of News Corp. stock.

News Corp. expects it to take about a year to complete the
deal. Upon closing of the proposed transaction, News Corp.'s shareholders would
receive one share of common stock in the new company for each same class News
Corp. share currently held. Following the separation, each company would
maintain two classes of common stock: Class A Common and Class B Common voting