News Corporation (ASX: NWS) shares are singing today and are up 9% from the open following the company's announcement in its FY24 results that it will look to sell its Foxtel division.
As a reminder, Foxtel is an Australian pay TV platform owned 65% by News Corp and 35% by Telstra Corporation (ASX: TLS).
This decision follows a nine-month strategic review News Corp conducted into the state of its assets.
Let's see what this means for investors.
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Strategic review lifts News Corp shares
The market has reacted positively to the company's move to explore a Foxtel sale.
News Corp announced the possible sale alongside its FY24 financial results. The company reported a 2% rise in revenue to US$9.88 billion, driven by a 21% increase in revenues from its ASX-listed subsidiary, REA Group (ASX: REA).
Meanwhile, net income was up 89% year over year to $354 million.
Foxtel streaming subscription revenues contributed 30% of total subscription revenues in the quarter, up from 27% in the prior year.
A move into streaming has added a whole new subscriber base for Foxtel, which is now the legacy product in this division of News Corp.
It also involves sports rights with some of the nation's largest sporting bodies, including the National Rugby League (NRL) and the Australian Football League (AFL).
This potential sale could impact Australia's media landscape, especially with Foxtel's strong presence in pay TV and growth from its streaming services, Kayo Sport and Binge.
These platforms grew Foxtel's subscriber base to 4.7 million in FY24, up 1% year over year.
News Corp says it has received third-party interest for the division.
In response to third party interest, the Company is assessing strategic and financial options for the Foxtel Group, including its capital structure and assets.
There is no assurance regarding the timing of any action or transaction, nor that the strategic review will result in a transaction or other strategic change.
This isn't the first time an offer has been made for Foxtel. A US TV industry investor offered around $3 billion for it back in 2020, according to The Sydney Morning Herald.
What's next?
Investors look to have welcomed the news of a potential Foxtel sale on Friday, potentially seeing it as a strategic move that could unlock significant value for shareholders.
The sale could also impact sports broadcasting in Australia, with Foxtel holding key rights for AFL, NRL, and cricket until the early 2030s.
News Corp CEO Robert Thomson stressed the importance of evaluating any interest in Foxtel to maximise shareholder returns.
We are confident in the Company's long-term prospects and are continuing to review our portfolio with a focus on maximizing returns for shareholders…
…We are evaluating options for the business with our advisors in light of that external interest.
Foolish takeout
Asset or division sales are one method companies can employ to unlock value for their shareholders, especially if the business is underperforming or if there's a sweet offer on the table.
Time will tell whether actual sales go through and what the long-term impacts on News Corp shares may be.
As always, remember to conduct your own due diligence.
