News Corp Takes $1 Billion Pre-Spinoff Charge, CS Sees It As Positive

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News Corp (NASDAQ:NWSA) is expected to take up to a $1.4 billion charge in the current quarter ahead of the spinoff of its publishing division. Over the weekend, Credit Suisse analysts Samantha Carleton and Lucas Good released an updated report about their expectations for both of the companies after the split.

News Corp Takes $1 Billion Pre-Spinoff Charge, CS Sees It As Positive

News Corp’s Pre-Spinoff Charge

Last week the board of directors formally approved the spinoff of the publishing division, with the two new companies to be named News Corp and 21st Century Fox. The separation is expected to be completed on June 28, which is the last trading day of the company’s fiscal 2013 year.

On Friday, News Corp (NASDAQ:NWSA) notified the Securities and Exchange Commission that it would take a pre-tax non-cash charge of between $1.2 billion and $1.4 billion in the fourth quarter of this year. The charge will be taken against both the Australian and U.S. publishing businesses.

Other details that were released on Friday include a $500 million stock buyback plan for the new News Corp after the spinoff. Also both companies will utilize anti-takeover provisions to keep anyone other than the Murdoch family from taking control over more than 15 percent of either company for at least a year after the separation of the two companies.

Credit Suisse’s View On News Corp

According to Carleton and Goode, the write-down enables the company to “clear the decks” ahead of the spinoff. The analysts said the write-downs on the company’s publishing divisions aren’t much of a surprise.

After the split, the publishing company’s buyback fund should provide some support after the split. They said the plan should create a base support level for the new company’s stock after the split.

The two analysts said they maintain their outperform rating and $36 per share price target for News Corp (NASDAQ:NWSA). After the split, they value shares of 21st Century Fox at $30 per share and the new News Corp publishing company at $6 per share.

Investor Days For News Corp, 21st Century Fox

Management has planned investor days for both companies after the split. The publishing division is holding an investor day in New York today and will hold a second one in Sydney, Australia on June 5. News Corp’s 21st Century Fox will hold its investor days in August after the company’s full-year results are announced.

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