News Corp. said that the publishing company it plans to spin off, “News Corp. Publishing,” won’t have to cover the costs of any civil settlements tied to the scandal over the illegal interception of voice-mail messages by journalists at its U.K. newspapers. In a filing with the SEC, News Corp. said the publishing company will be indemnified by its former parent for any payments made after the spinoff that arise from civil claims and investigations relating to the phone-hacking scandal. The filing noted that the publishing company won’t be indemnified for any criminal fines or penalties flowing out of the scandal.
Between July 1, 2010, and the end of last year, News Corp. “incurred legal and professional fees” relating to the phone-hacking scandal and related matters totaling $250 million, while $25 million has been paid in civil settlements. It has set aside another $70 million, which the company indicated was its “best estimate of the liability for the claims that have been filed,” reported The Wall Street Journal.
News Corp.’s publishing spinoff, set to become a separate publicly held business in June, will start out with $2.6 billion in cash after receiving a $1.82 billion infusion from the parent company.
“The new News Corporation’s strong balance sheet will provide the Company with full financial flexibility to pursue its strategic agenda, which is to further develop and expand the power of its market-leading brands over a myriad of platforms,” said Rupert Murdoch, Chairman and CEO of News Corp. “We believe the new News Corporation’s strong balance sheet, along with its diversified revenue base, will be key competitive assets that will allow the company to lead in innovation and the creation of long term shareholder value.”
Murdoch is breaking off the division from the company’s entertainment operations, which will be called the Fox Group Inc. News Corp. agreed to the spinoff last year to focus on its more valuable Fox television and film businesses.
The publishing company being spun out will own all of News Corp.’s newspapers, including its British and Australian titles as well as Dow Jones & Co., publisher of The Wall Street Journal, some Australian television assets and book publishing. It will retain the News Corp. name while the much bigger company holding the entertainment operations will be called Fox Group.
RBR-TVBR observation: This move will certainly put confidence in the new publishing division, as well as separate it moving forward from the scandal. The decision, along with the announcement it will launch with $2.6 billion in cash, gives it a heck of a launch pad.