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News Corporation is likely to split in two, possibly as early as this Thursday. This maneuver would divide the entertainment and publishing businesses into two separately listed companies. The decision will be taken at at a board meeting in New York on Wednesday.

Similar proposals have been floated before. The newspapers carry lower profit margins than News Corp.'s entertainment businesses. However, Rupert Murdoch has always strongly resisted the suggestion, and the News Corp board is rigged so that his word is always the final one.

This time around, the situation is different, and The Guardian reports that Murdoch is inclined to agree.

The Guardian's reporting leans toward the thesis that the phone hacking scandal could be seen as a bottomless pit of potential liabilities, and that the entertainment business needs to be shielded from that possibility.

Claire Enders of UK media research firm Enders Analysis told MediaGuardian that the proposals are at an early stage and that the asset structure for the separate listed companies has yet to be analysed.

One of the big difficulties, Enders said, is where to house the unquantifiable liabilities arising out of the phone-hacking scandal that led to the abrupt closure of the News of the World last summer.

Already News Corp has spent £100m on legal bills and damages and this will continue to rise, with UK subsidiary News International recently admitting it could face up to 500 claims in the civil courts. Several current and former News International journalists also face possible criminal prosecution over alleged phone hacking and illegal payments to police and other public officials.

Enders said the floating off the publishing business, which would include book publisher HarperCollins and the Dow Jones financial news and information agency, as well as News International and News Corp's other newspapers in the US and Australia, will mean it may no longer benefit from "Rupert's blank cheque" and would be unattractive to investors who would see it as a "zombie company".

Murdoch could use some of News Corp's $10bn-plus cash reserves to fund the publishing unit and may also try and ringfence the phone-hacking liabilities by announcing a "knock-out" contingency fund for related costs, according to insiders at News International.

Staff at News International's Wapping headquarters in east London are concerned that the move could be the beginning of the end for the publishing operation in its present form. "We don't know what this means," said one employee. "Who in their right minds would buy us? We are a basket case."

Others insiders said there is a belief that the News Corp split could result in a new privately owned publishing business being established, run by Rupert Murdoch's eldest son Lachlan.

"The idea that Rupert would go to all this trouble to flog the newspapers just isn't plausible," said one insider.

Another insider added: "Why would anyone buy assets like this when you don't know what the final bill is? I would not be surprised if the Murdochs buy the shares back and take it into private ownership again with Lachlan at the helm. It would be the best possible outcome for the British papers.".

Lachlan was once seen as the heir apparent to his father and was made deputy chief operating officer at News Corp in New York – the position his brother James now holds – but walked out seven years ago after falling out with Fox News chairman Roger Ailes. He returned to Australia to set up a media investment company and is now chairman of commercial TV broadcaster Ten Network.

Of course, the Wall Street Journal provides the loyalist position:
Analysts expect expenses related to the phone-hacking scandal to be manageable. In the nine months through March 31, the company said it has spent $167 million on the investigations, mostly on fees for outside lawyers and advisers. Sanford C. Bernstein analyst Todd Juenger says the entertainment company may remain liable for any future claims from the hacking, but he sees those costs remaining less than $1 billion. "Given the size of the company, most investors just shrug it off," he said.

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