UNITED STATES - Wall Street rewarded Rupert Murdoch's move to create a separate entertainment company, giving 21st Century Fox one of the richest valuations in the media sector on its first day of trading.
Investors had waited for Murdoch to split News Corp, giving its cable, movie and equity stakes in pay-TV assets their own spotlight away from the publishing division.
The move is part of larger trend among media companies that are shedding print properties. Tribune announced on Monday it will acquire a stable of TV stations making it one of the largest local TV broadcasters while it seeks a possible sale of its newspapers.
21st Century Fox, which includes the Fox cable network, already has one of the highest valuations among its media peers based on 2013 price to earnings multiple. At 20.7 times, it is higher than Walt Disney, Viacom and Time Warner, and ranks second only to Discovery according to estimates from UBS analyst John Janedis.
Shares in the new 21st Century Fox entertainment operation gained over 2 per cent on Monday, or US$1.1 billion dollars (S$1.4 billion) in market value, from its opening price. Its market capitalisation is about $68 billion, reflecting Monday's gain.
"By divesting its less attractive legacy business, Fox has become a pure-play entertainment company with fantastic assets in its cable channels," Gabelli & Co analyst Brett Harriss said.
In contrast, shares of the new News Corp, which includes publishing assets like The Wall Street Journal and HarperCollins, and an education division, lost 3 per cent, or half a billion, from their opening price. News Corp has a current market value of about $8.5 billion.
"News Corp is largely seen as ink on paper, and the perception is that the good assets, so to speak, went to Fox," said Gabelli & Co analyst Barry Lucas.
Evercore Partners analyst Alan Gould called the new Fox company one of the fastest-growing entertainment conglomerates. In a note to investors on Monday, he gave the stock an "overweight" rating and a $34 price target.
The stock is now trading at about 9.3 times earnings before interest, taxes, depreciation, and amortization (EBITDA), said Gabelli's Harriss. That compares with 7 times EBITDA before the split.