News Corp's Cash for Spinoff Raises Acquisition Potential
When News Corp. spins off its publishing assets this summer, it plans to start the new company with $2.6 billion in cash and no debt, according to a new regulatory filing. That kind of cash means the potential for some major acquisitions, even as CEO Robert Thomson struggles with declining print advertising revenue.
"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 News Corp.'s Chairman and CEO Rupert Murdoch in the filing.
One possible acquisition could be Time Inc., which is set to be spun off from Time Warner into an independently traded company. However, it is not a natural fit for News Corp.
Time Inc. is focused on magazines, whereas News Corp. doesn't have any magazine assets. Would they complement News Corp.'s newspapers and book publishing business? Last month, when Time Warner was first in discussions with Meredith to sell a handful of its female-oriented titles, sources said News Corp. was definitively not interested. Although News Corp. could afford Time Inc.'s roughly $3 billion valuation, the deal seems unlikely.
A much better fit would be the Tribune's papers, including its Chicago flagship, as well as the Los Angeles Times and six other papers. Earlier this month The Tribune Company said it wanted to sell all its assets together, rather than splitting up its papers.
Although Murdoch has been long reported to be interested in the Los Angeles Times, it could certainly snap up all of them, especially considering that in its bankruptcy filings the publishing group was valued at just $623 million.
However, with any major newspaper acquisitions, News Corp. could face regulatory hurdles.
The other question is whether Thomson will pursue digital publishing assets or more education companies, like its Amplify division, led by Joel Klein.
News Corp. did not respond to requests for comment.
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin