NEWS CORP current report, 31 March 2020

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Business Context and Reporting Period

Company: News Corporation (NWSA/NWS)
Filing Type: Form 8-K (Current Report)
Date of Report: March 31, 2020
Event: Announcement of a definitive agreement to sell the News America Marketing (NAM) business to Charlesbank Capital Partners as part of a strategic portfolio optimization.

Key Financial Metrics

Transaction Consideration: Up to approximately $235 million in cash.
Payment Structure: $50 million at closing; deferred payments between $125 million and $185 million payable within five years.
Equity Retention: Option to retain up to 15% equity (5% at closing, 10% via five-year warrant).
NAM Historical Performance (Six months ended Dec 31, 2019):

  • Net Loss: $201 million
  • EBITDA: $19 million
  • Impairment and Restructuring Charges: $246 million

Note: The filing does not provide consolidated revenue, profit, or cash flow metrics for News Corporation as a whole, only specific data for the divested NAM unit.

Material Changes and Transaction Details

The primary material change is the divestiture of the News America Marketing business. The transaction is expected to close in the fourth quarter of fiscal 2020, subject to regulatory approval and customary closing conditions. News Corporation will retain certain liabilities related to NAM, specifically those arising from ongoing legal proceedings with Valassis Communications, Inc. and Insignia Systems, Inc.

Outlook, Risks, and Contingencies

Management Commentary: The sale is intended to simplify the Company's structure and optimize its portfolio. Management views EBITDA as a useful non-GAAP measure for evaluating NAM's operating performance, though it notes historical results may not indicate future performance due to factors like customer preferences.
Risks and Uncertainties:

  • Completion of the transaction is contingent on regulatory approvals and closing conditions.
  • Forward-looking statements are subject to uncertainties, including the impact of the new coronavirus pandemic.
  • Actual results may differ materially from expectations regarding the timing and benefits of the sale.
Unusual Items: The reported $201 million net loss for NAM included significant impairment and restructuring charges of $246 million.

Investor Verification Checklist

  • Verify the final closing date and whether the transaction closes in fiscal Q4 2020 as expected.
  • Confirm the final purchase price after customary working capital adjustments.
  • Monitor the status of regulatory approvals required for the sale.
  • Assess the potential financial impact of retained liabilities related to Valassis Communications and Insignia Systems legal proceedings.
  • Review the impact of the coronavirus pandemic on the transaction timeline and NAM's operations prior to closing.