Rupert Murdoch’s News Corp. will swap its controlling stake in DirecTV with John Malone’s Liberty Media in exchange for Liberty’s 16% stake in News Corp., the parties said today.
NEW YORK (AP) — Rupert Murdoch’s News Corp. will swap its controlling stake in the satellite TV broadcaster DirecTV Group Inc. with Liberty Media Corp. in exchange for Liberty’s 16 percent stake in News Corp., the companies announced Friday.
The deal settles a long-simmering dispute between Murdoch, News Corp.’s chairman and CEO, and Liberty’s Chairman John Malone, who surprised Murdoch two years ago by suddenly building up a large stake in the global media conglomerate that Murdoch built.
Under the deal, which had been expected, News Corp. will give Liberty its 38.4 percent stake in DirecTV, three regional sports cable networks and $550 million in cash.
In return, News Corp. will receive Liberty’s entire stake in News Corp., which is worth 16.3 percent of the company’s value. News Corp. said in a statement that the deal will amount to a buyback of about $11 billion of its own stock.
The deal is subject to various regulatory approvals and must also be approved by a majority of the holders of News Corp.’s Class B voting shares, excluding the Murdoch family and Liberty.
With the deal with Liberty complete, News Corp. said it expected to cancel its ”poison pill” antitakeover measure, which had faced objections from shareholders. News Corp. also said it would consider eliminating its staggered board, in which not all of the company’s directors stand for election each year.
Discussions between News Corp. and Liberty had been dragging on for months, and other possible scenarios for exchanging Liberty’s stake had also emerged. By arranging the exchange as a swap of assets instead of a purchase, both sides will avoid enormous tax bills.
The tensions between Murdoch and Malone dated back to 2004, when Malone—a cable industry pioneer and a longtime powerhouse in media investing—surprised Murdoch by taking advantage of active trading in News Corp. stock as it relocated its headquarters from Australia to the United States to quickly accumulate a large voting stake in the company.
Malone’s stake is currently worth about 16 percent of News Corp., but since many of the shares are the Class B voting shares, Malone’s voting power was about 19 percent, potentially rivaling the Murdoch family’s voting power of about 30 percent.
In addition to the 38.4 percent stake in DirecTV, Liberty will also receive three regional sports networks—FSN Northwest, FSN Pittsburgh, and FSN Rocky Mountain.
For News Corp., the deal with Liberty removes a potential threat to the Murdoch family’s control of the company, a major global media conglomerate that includes the Twentieth Century Fox movie and TV studio; the Fox broadcast network; the Fox News Channel and FX cable networks; a large portfolio of newspapers in the United Kingdom and Australia as well as the New York Post; and the social networking site MySpace.
For Liberty, the deal further simplifies a complex financial structure for the Englewood, Colo.-based company, which holds stakes in a number of other companies, and gives it another operating business to run. Liberty owns the home shopping network QVC and the pay TV channel Starz. DirecTV has 15.6 million subscribers.
Liberty shares rose $3.21, or more than 3 percent, to $96.85 in morning trading on the Nasdaq Stock Market. News Corp. shares rose 13 cents to $21.71 on the New York Stock Exchange.