Shareholders have been pushing for some time for News Corp to get rid of its newspapers business, after a phone hacking scandal hit Murdoch’s British newspapers and forced the company to drop its proposed acquisition of pay-TV group BSkyB.

A split would be the clearest sign that the global media conglomerate is making a break from its newspaper roots, and will raise new questions about the succession plan at the family-controlled business with an 81-year old patriarch.

Many investors have said they favor Chief Operating Officer Chase Carey to take the chief executive job running the entertainment business, perhaps with Murdoch as chairman.

Murdoch’s children Elizabeth and James, both senior News Corp executives, are expected to stay with the entertainment unit. It is less clear who would run the publishing business, with options including Murdoch himself, the return of his eldest son Lachlan to an executive role, or Joel Klein, the head of News Corp’s fledgling education business.

In a one-sentence statement, News Corp confirmed news reports that it is “considering a restructuring to separate its business into two distinct publicly traded companies.” The conglomerate gave no other details.

According to one person familiar with the situation, a move to separate entertainment and publishing is being championed by Carey as a way to boost shareholder value.

The matter has been under discussion for a “considerable period of time” and no final decision has been made, a second source said, adding that no plan has yet been formally proposed to the board.

A third source with knowledge of the matter said a plan to break up the company Murdoch has controlled for more than 50 years ago is under “serious consideration.”

“There became a moment when he started to realize this would be the best way to allow both businesses to grow in their own way,” the person said. All three sources spoke on condition of anonymity.

ANOTHER TILT AT BSKYB

Carey said in May that management and the board had discussed spinning off the publishing business following investor pressure but did not have any plans to push ahead at that time.

The Australian-born Murdoch made his name by buying newspapers in Australia and then the News of the World, the Sun and the Times newspapers in Britain, and he talks often about his love for newspapers and the publishing industry.

Murdoch had earlier opposed a split, and as recently as May said the group was not considering spinning off its British newspapers to protect the rest of the empire.

Analysts believe investors and some management felt emboldened by the hacking scandal to push for a change. The Wall Street Journal, which is owned by News Corp, reported that the Murdoch family is not expected to lose its effective control of any of the businesses involved if a split goes through.

London-based analyst Ian Whittaker at Liberum Capital said a spinoff of the publishing division could enable News Corp to make another bid for BSkyB once the hacking scandal died down.

“It makes sense, given that the newspaper part has been the scandal-hit element of the business,” he said. “It also suggests that they may even have another tilt at Sky in the medium term. I imagine it would be seen as positive by the shareholders outside of the family.”

News Corp pulled its $12 billion bid for the 61 percent of BSkyB it did not already own last July, under a weight of public outrage sparked by the admission that staff at the News of the World tabloid had repeatedly hacked into phones to source salacious stories.

Shares of News Corp plummeted last year, at the height of the hacking scandal, before recovering this year to hit four-year highs, helped by a $10 billion share buyback program. The stock was up 6.1 percent at $21.31 in early afternoon trading.

PUBLISHING UNIT

News Corp’s film and television businesses include the 20th Century Fox film studio, Fox broadcasting network and Fox News channel. The entertainment business, which generated revenues of $23.5 billion in the year to June 2011, would dwarf the publishing unit, which posted $8.8 billion in revenue.

The publishing division includes the HarperCollins book publisher, the education arm headed by Klein, and newspapers including The Wall Street Journal, the Times of London, the Sun, the New York Post and The Australian.

Publishing, including integrated marketing services, accounts for around 7 percent of News Corp’s enterprise value, according to analysts at Barclays Capital. It estimates that publishing represents 24 percent of revenues and around 11 percent of operating income.

News Corp’s 39 percent stake in BSkyB came under scrutiny in the spring after a British parliamentary committee questioned whether Murdoch was “fit and proper” to run the business.

British regulator Ofcom is currently deliberating that point among others and is due to make a decision in coming weeks.

“It’s about Ofcom deciding whether the company is fit and proper to hold a broadcast license,” said Canaccord Genuity analyst Thomas Eagan. “This split would help ameliorate those concerns.”

The hacking scandal reverberated throughout the wider New York-based media conglomerate and disrupted what was thought to have been a smooth plan for Murdoch to be succeeded as CEO by his youngest son, James.

It has also revealed the close relationships in Britain between the government and News Corp executives. Police have arrested over 50 News Corp staff and public officials while the former head of the British newspaper division Rebekah Brooks, a close confidante to Murdoch, is awaiting a trial for interfering with the police investigation. DM

Photo: News Corporation Chief Executive and Chairman Rupert Murdoch leaves after giving evidence at the Leveson Inquiry at the High Court in London in a April 26, 2012 file photo. Rupert Murdoch and his son James will be in the firing line on Tuesday when a British parliamentary committee issues its verdict on a phone-hacking scandal that has convulsed the family media empire and undermined the British government. REUTERS/Olivia Harris/files