FoxIPO/Swertlow/8″/mike1st/mark2nd

No. 7

News Corp. Spins Off Fox Entertainment

For years, Rupert Murdoch complained that his far-flung media empire was undervalued by Wall Street, as well as by overseas investors. To remedy that, Murdoch spun off News Corp.’s entertainment assets into a separate public company called Fox Entertainment.

Among the new company’s assets are the Fox television network, 22 Fox TV stations in the United States, Twentieth Century Fox Film Corp., 30 regional sports networks, the Los Angeles Dodgers and minority interests in the Lakers, Kings and New York Rangers sports franchises.

These assets generated almost $7 billion of News Corp.’s $11 billion in 1997 revenues.

Why an IPO? Fox’s U.S. entertainment assets are much easier for Wall Street analysts to track and understand because they are more straightforward, while News Corp.’s remaining assets are a maze of industries (newspapers, magazines, book publishing and satellite TV operations) linked through multiple joint ventures in various foreign countries.

Murdoch concluded that those convoluted operations were to blame for his company’s “undervalued” stock price.

Fox was originally to sell a 20 percent stake in the IPO for total proceeds of about $4 billion. When it came to market in November, only 18.6 percent was sold for $2.8 billion. Nonetheless, it qualified as one of the largest media IPOs in history.

Some analysts anticipated that Murdoch would use the proceeds to pare down News Corp.’s debt load. But less than two months after the offering, Murdoch embarked on yet another acquisition. His Milan-based company, News Corp. Europe, agreed to purchase an 80 percent stake in an Italian digital pay TV service for $120 million.

Frank Swertlow