Valassis to News Corp: Show Me the Money

News Corp.'s News America Marketing division has taken a hit following its settlement with Valassis, but the losses will be absorbed with relative ease by its parent company, according to market watchers.
By Andrea Tse ,

NEW YORK (

TheStreet

) --

News Corp.'s

(NWSA) - Get Report

News America Marketing division has taken a hit following its settlement with

Valassis Communications

(VCI)

over anticompetitive allegations, but at least one analyst says the losses will be absorbed with relative ease by its parent company.

David Joyce, a Miller Tabak + Co. media industry analyst, says that News America Marketing stands to lose some$1.2 billion in revenue for the fiscal year and $375 million in operating income.

"These are significant losses, but can be absorbed in

News Corp. as a whole," Joyce says. For a company the size of News Corp., a $500 million settlement is not, in the absolute sense, that significant, Joyce points out.

News Corp. had total assets of about $55 billion and total annual revenues of about $30 billion as of Sept. 30, 2009, according to a recent SEC filing.

Joyce says News America and its newspaper coupon inserts business has had fairly healthy growth. However, the unit hasn't been the primary focus of investors. After all, they have other issues they're preoccupied with right now.

"Investors are still unhappy with the Dow Jones acquisition, but are really focusing on TV stations because of poor ad revenues," Joyce explains. They're also focused on the News Corp.'s entertainment and cable divisions, given the recent success of the blockbuster sci-fi film

Avatar

.

Avatar

-- which has become, in adjusted dollars, the highest-grossing movie of all time -- is distributed by Twentieth-Century Fox, a division of News Corp.

Joyce said that Valassis stands to benefit, as it takes some form of News America's assets to the market. As part of the settlement, News America will enter into a 10-year shared-mail distribution agreement with Valassis Direct Mail, a Valassis subsidiary.

On Jan. 30, News Corp. announced that it had settled with Valassis Communications for $500 million a lawsuit filed against the company's News America Marketing unit; the lawsuit was scheduled to go to trial in a Michigan federal court on February 2, 2010. The settlement also covers the $300 million Valassis was awarded in July in a Michigan circuit court, which is currently on appeal in California.

"It has become evident to our legal advisors from pre-trial proceedings over the past couple of weeks that significant risks were developing in presenting this case to a jury," News Corp.'s deputy chairman and chief operating officer, Chase Carey said in a statement regarding the settlement. "That, coupled with concerns over the venue, led us to believe it was in the best interests of the company and its stockholders to agree to a settlement."

News Corp. has edged 0.9% lower to $12.50 in Monday trading, while Valassis has shot up 16% to $24.30.

Several media stocks have advanced in early afternoon trading.

Time Warner

(TWX)

has added 1.8% at $27.90 and

CBS

(CBS) - Get Report

is up 1.9% at $13.20.

-- Reported by Andrea Tse in New York

>>See our new stock quote page.

Follow TheStreet.com on

Twitter

and become a fan on

Facebook.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Loading ...