News Corp. considers plan to split in two

The Wall Street Journal, News Corp.'s flagship newspaper, reported late Tuesday that News Corp.'s board of directors will consider the plan Wednesday and possibly announce its approval Thursday morning.

Under the proposal, newspapers will be shunted off into a separate publicly traded entity, which Murdoch will control along with a second company that comprises News Corp.'s TV and movie business.

Investors hailed Tuesday's announcement that News Corp. is considering a split, sending the stock up $1.68, or 8.34 percent, to close at $21.76 Tuesday.

During the day, the stock was as high as $21.89, its highest level since hitting $21.90 on Oct. 25, 2007.

Analysts said the newspaper and book publishing division could be worth about $5 billion -- what Murdoch paid the Bancroft family for Dow Jones & Co., the publisher of The Wall Street Journal, in 2007.

News Corp. investors have never liked that acquisition and over the last five years the stock price has stagnated, hurt by fears Murdoch would overpay for other newspaper assets.

By contrast, investors adore chief operating officer Chase Carey, who along with Murdoch's son James, the deputy COO, have been steering the company toward a future based on expanding profitable pay TV operations around the globe.

The split could be beneficial for both companies. Part of News Corp.'s problem in recent years is that it has been trying to please two kinds of investors with different, and somewhat conflicting, demands: Those looking to make a killing on a rising stock price and more conservative ones who like less risky, more predictable companies that pay generous dividends.

News Corp. has failed to please either. Its stock is no higher than it was five years ago, and it pays a dividend of just 17 cents a year, or 0.8 percent of what it costs to buy a share. The average company in the S&P 500 stock index pays its owners cash each year equivalent to 2 percent of its stock price.

A spinoff might change this. It would free the TV and film business from the drag of the slower-growing publishing business. And it would allow the publishing business the freedom to hike its cash payout.