The publishing company created by the split of Rupert Murdoch’s News Corp made a muted stock market debut on Wednesday.
The class B voting shares of the “new News Corp’, trading on the Australian Securities Exchange, fell 3 per cent to A$14.55, valuing the newspaper-focused business at A$8.3bn (US$7.9bn).
The performance of the shares is being closely tracked in Australia because of fears that US-based investors might dump the spin-off stock. Shareholders backed the demerger last week, which will see News Corp’s faster growing entertainment assets separated from its newspaper and publishing assets.
“New News” will control all of News Corp’s newspaper assets in Australia, the UK and the US as well as book publisher HarperCollins. It will also inherit a majority stake in online property listings business, REA; Fox Sports Australia, which owns valuable rights to Australian rules football; and a 50 per cent stake in pay-TV group Foxtel.
The publishing spin-off has been handed a US$2.6bn cash dowry. Some US$500m of that capital has been assigned for share buybacks to prop up the stock if investors decide to sell.
The rest is expected to be used to fund further newspaper restructuring, investment in digital businesses and deals, possibly a merger of HarperCollins with another publisher such as a Simon & Schuster. Other acquisition targets, according to analysts, could include Tribune Co, publisher of the Los Angeles Times.
Ahead of the demerger, analysts Macquarie Securities said they expected “new News” to starting trading at about A$15, a 20 per cent discount to their sum of parts valuation to reflect the company’s diverse asset mix, earnings headwinds and uncertainty over acquisitions.
Macquarie expects “new News’” earnings before interest tax, depreciation and amortisation to fall 16 per cent in the 2013-14 financial year to US$788m, but recover to US$817m in 2014-15.
Shareholders are being given one share in the publishing spin-off for every four they already own in News Corp, which will be renamed 21st century Fox after the split formally takes place on June 28.
Class B voting shares in the entertainment business meanwhile, settled at A$30.50 on Wednesday. That gave 21st century Fox a market value of slightly more than A$70bn. The combined value of the two stocks, adjusted to reflect the terms of the demerger, was A$34.16, slightly above where the shares closed in New York on Tuesday.
Both companies have inherited News Corp’s dual class share structure, and a newly adopted poison pill provision, which makes it impossible for the next year, for any rival to build a stake of more than 15 per cent.
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