June 28 (Bloomberg) -- News Corp. founder Rupert Murdoch, who announced plans today to spin off the company’s publishing division, is evaluating internal candidates for chief executive officer of the business.
News Corp. has “world-class executives we’re looking at,” Murdoch, CEO of News Corp., said in a phone interview. “We’ve got plenty of time, and we’re in no hurry to make a decision.”
Murdoch’s remarks signal a preference for an inside manager for the job, which would involve overseeing newspapers in the U.S. and U.K., as well as publications and television stations in Australia. Top executives at the business include Dow Jones & Co. Editor-in-Chief Robert Thomson and CEO Lex Fenwick, along with Brian Murray, head of News Corp.’s HarperCollins book division.
The new CEO will inherit assets including News Corp.’s publishing unit, which saw profit drop by 32 percent from fiscal 2008 to 2011, according to Bloomberg data. It will also have a clean balance sheet and internationally recognized brands, such as the Wall Street Journal, New York Post and Times of London. A new leader will have to confront slowing growth, especially in Australian newspapers, and a U.K. hacking scandal that has led to the arrests of more than 50 people.
“It’ll be a tough job, but there are still some good businesses,” said Barton Crockett, an analyst with Lazard Capital Markets in New York.
Book, education and marketing assets also will be part of the publishing company, according to a statement today from News Corp. Murdoch will be chairman of both companies and CEO of the entertainment business when the deal is completed in about 12 months. The publishing unit will have no debt and “very large reserves of cash,” Murdoch said in an interview with Bloomberg Television.
The stock fell 1.4 percent to $21.99 at the close in New York. The shares have gained 9.5 percent in the three days since News Corp. announced it was considering a breakup.
Other candidates may include Joel Klein, who recently stepped down from his role overseeing the company’s internal hacking probe to return to his duties as CEO of the company’s fledgling education unit. He previously served as a Justice Department lawyer and chancellor of New York City’s public schools.
Tom Mockridge, head of the company’s U.K. publishing group, is another possibility. He replaced Rebekah Brooks following the scandal. Kim Williams, head of the company’s Australian unit, may also be in the mix. News Corp. declined to comment on who may be in contention.
The Australian business is already making cuts to cope with slower growth.
“We’re going through a big reorganization,” Murdoch said today in the Bloomberg interview. “We have not been specific about how many people we’ll lose, but there will be loss in numbers there.”
More reductions will probably be necessary worldwide, said Ken Doctor, an analyst with Burlingame, California-based Outsell Inc., a research firm focused on the publishing industry.
“In order to stabilize it over the next two to three years, they’ll have to make cuts, whether in staffing or possibly divesting some newspapers such as Times of London,” Doctor said.
Murdoch said on the Fox Business Network that his son Lachlan, a former publisher of the New York Post, is “highly unlikely” to become CEO of the spinoff. Asked if any of his children will take on an expanded role in the new companies, Murdoch said, “They will have to earn it -- and want it.”
Lachlan is currently chairman of Ten Network Holdings Ltd., owner of one of Australia’s largest television networks. Murdoch’s daughter Elisabeth, meanwhile, founded TV production company Shine Group Ltd. She sold it to News Corp. for 415 million pounds ($643 million) last year.
News Corp. may be considering Thomson, 51, a former editor at Pearson Plc’s Financial Times newspaper who joined News Corp.’s U.K. newspaper division in 2002.
Murdoch, 81, named Thomson publisher of the Wall Street Journal in 2007 when News Corp. acquired Dow Jones, the financial newspaper’s publisher. He became editor-in-chief of all of Dow Jones in 2008. Like Murdoch, Thomson is from Australia.
Fenwick came on board in February. He replaced Les Hinton, who departed as Dow Jones CEO in July amid fallout from the hacking scandal. Hinton had been in charge of News Corp.’s British papers when the hacking took place.
Fenwick previously served as CEO of Bloomberg LP, where he worked for almost 25 years. Bloomberg competes with Dow Jones in supplying financial news and information.
News Corp.’s publishing units bring in about $1.3 billion in annual earnings before interest, taxes, depreciation and amortization, estimates Brett Harriss, an analyst at Gabelli & Co. in Rye, New York.
Profit at the unit fell to $864 million in fiscal 2011 from $1.28 billion in fiscal 2008, according to data compiled by Bloomberg.
Not everything makes money, though. The New York Post loses as much as $110 million annually, according to Harriss.
News Corp. maintains a large foothold in Australia’s country’s newspaper market. The papers there, including the Australian national daily, bring in about $530 million in annual EBITDA, estimates Harriss. That’s more than any other publishing asset within the company, he said.
The breakup comes after the hacking scandal threatened the company’s holdings in satellite-TV company British Sky Broadcasting Group Plc. Ofcom, a U.K. media regulatory agency, is considering whether News Corp. should be allowed to keep its 39 percent stake in BSkyB.
The scandal, which erupted last July, centered on News Corp.’s tabloid journalists hacking into the phones of U.K. politicians and celebrities for exclusive stories. The outcry prompted News Corp. to shelve plans to take full control of BSkyB, Britain’s biggest pay-TV operator, which was led by Murdoch’s son James for almost a decade.
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