D* buying E*? Looks Unlikely. Rupert selling D*? Maybe

Tom Bombadil

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May 5, 2005
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Rupert Murdoch wants John Malone to get out of his hair. To that end, Murdoch might be offering Malone DirecTV. Murdoch's News Corp. is proposing to Malone's Liberty Media a tax-free exchange of its DirecTV stake in return for the $10 billion stake Liberty owns in News Corp., according to a report by CNBC's David Faber.

Both News Corp. president Peter Chernin and Liberty CEO Greg Maffei have been hinting to investors at a Merrill Lynch media conference today that a swap may be under way, according to the report.

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Liberty last year abruptly increased its voting stake in News Corp. from 9% to 17%, startling company Chairman Rupert Murdoch and prompting him to establish defenses against an unwelcome takeover.

News Corp. has tried unsuccessfully for years to lure Liberty out of the company., but has never offered anything Malone deemed worthy of exchanging for his stake, 188 million voting shares and 324 million non-voting shares. In the past, for example, News Corp. offered Liberty several local stations .

With the satellite business limited in its growth, DirecTV has frustrated News Corp. lately which could explain the company's willingness to part with it. Murdoch aggressively went after DirecTV for years, but has been so disappointed with it lately, he has called it a "turd bird."
 
One of the reasons CNBC gave was that Murdoch was upset that D* couldn't figure out how to have a broadband capability to allow for better compation with telco's and cable offering their 'triple play'.

Too bad something like this didn't happen earlier, we might be looking at a new MPEG4 Tivo box vs. the HR20.
 
Here's a take on the story from an Australian news source:

NEWS Corporation has held talks to swap its controlling stake in DirecTV Group Inc for Liberty Media's stake in News Corporation, according to a CNBC report overnight.

Rupert Murdoch has been in discussions to buy back a 20 per cent voting stake in News Corporation from Liberty Media Chairman John Malone since 2004 and CNBC quoted unidentified sources as saying their talks have recently centred around DirecTV.

Mr Malone quietly boosted his stake in the company that owns MySpace and the 20th Century Fox film studios as News Corp (parent company of the publisher of NEWS.com.au) (nws.ASX:Quote,News) moved its domicile to the United States.

Mr Malone purchased the stake as big Australian shareholders were required to sell off the stake in a non-Australian company.

The on-again and off-again discussions to sell the stake have heated up in recent weeks ahead of News Corp's October 20 annual shareholders meeting, where management will be required to seek shareholders approval to extend a poison pill that protects it from a hostile takeover, CNBC reported.

It said the current scenario called for News Corp to swap its 38 percent controlling stake, worth about $US9 billion ($11.9b), in DirecTV, the top US satellite television operator, for Liberty's stake in News Corp.

News Corp and Liberty had no comment. Mr Malone and analysts have said the discussions have centered around defraying potential tax liabilities.

News Corp would also be required to contribute an operating business in order for the transaction to be tax free according to a Merrill Lynch report.

According to CNBC, Mr Murdoch, who once touted its global network of satellite TV assets, has soured on the business as it has been unable to offer high-speed internet service without partnerships with telephone companies.
 
DirecTV Swap Between News Corp., Liberty Media?
News reports yesterday suggested that News Corp. and Liberty Media are discussing an agreement that would include swapping News Corp.'s 40 percent stake in DirecTV - worth about $9 billion - for Liberty's 18 percent hold on News Corp. (valued currently at $11 billion).

According to Wachovia's Jeff Wlodarczak citing a CNBC report, News Corp. owner Rupert Murdoch is souring on DirecTV and his company is attempting to resolve the 18 percent ownership stake issue by the Oct. 20 shareholder meeting. Press reports have noted that Liberty is also talking to News Corp. regarding its TV stations, the report said.

Wlodarczak said Murdoch seems to vary from week to week on his commitment to being in the satellite television biz as "industry transforming transactions" loom on the horizon for the U.S. DBS market.

Speaking on the recent talks of a merger between DirecTV and EchoStar Wlodoarczak said, "If management reached the conclusion that they could not clear regulatory hurdles or EchoStar CEO (Charlie) Ergen is unwilling to sell, it may - along with the prospect of buying back the 18 percent in News from Liberty - have opened up the possibility of a News Corp. exit from DirecTV.

"If News Corp. decides to swap its stake in DirecTV with Liberty Media it would likely reduce EchoStar's short-term negotiating leverage for a potential sale of the company to AT&T," the analyst said.
 
Tom Bombadil said:
Got to love Rupert calling D* a "turd bird."
That's what I call it each and every time I view my friends D* HD-Lite. Seriously, both D* and E* are going to be in for a serious run from their money from cable and the telcos and will be forced to merge at some point down the road.
 
Doesn't anyone else wonder how much their taxes will increase to make up for those lost by the "tax free exchange" of 9 & 11 billion entities.
 
So IF Rupert does give up his controlling interest in Directv to John Malone from LIberty media , then does that mean Directv will now be run by John Malone from Liberty Media?
 
Yup.

Can you say TCI Part Two?

Haha Rupert Called DirecTV a Turd Bird. Yup someone up there loves you, and if you dont watch out you could get a bird turd dropped on you.
 
Scott Greczkowski said:
Yup.

Can you say TCI Part Two?

Haha Rupert Called DirecTV a Turd Bird. Yup someone up there loves you, and if you dont watch out you could get a bird turd dropped on you.
Gee I thought he was talking about that quality HD picture coming from the sky. LOL
 
rad said:
One of the reasons CNBC gave was that Murdoch was upset that D* couldn't figure out how to have a broadband capability to allow for better compation with telco's and cable offering their 'triple play'.

Too bad something like this didn't happen earlier, we might be looking at a new MPEG4 Tivo box vs. the HR20.

If they would have used the Spaceway bird for what they were initially built for maybe broadband wouldn't be as big as an issue.

BTW the spaceway birds were initially meant for highspeed internet.
 
RVD420 said:
If they would have used the Spaceway bird for what they were initially built for maybe broadband wouldn't be as big as an issue.

BTW the spaceway birds were initially meant for highspeed internet.

But with the latency issue that all geo synchronous internet solutions have, and their high price, nobody that has access to land based access would want it.
 
I wonder if John Malone thinks owning D* is more attractive than owning 18% of News Corp?

If Rupert thinks it is a "turd bird" and wants to dump it, why would Malone want it?

Unless he has ideas on how to position DBS for the future.
 
Rupert Murdoch spent more than a decade trying to gain control of DirecTV Group Inc., the United States' leading satellite TV operator.

But the chairman of News Corp. appears willing to give that up for something he values even more: bulletproof control of his own company.

Murdoch is currently negotiating to swap his 38 percent stake in El Segundo, Calif.-based DirecTV to cable pioneer John Malone for the 19 percent voting stake in News Corp. owned by Malone's Liberty Media Corp., according to two people familiar with the negotiations.

The trade would free Murdoch from fears that Liberty's chunk could fall into unfriendly hands and threaten his family's grip on News Corp. In the last year and a half, Liberty has become the second-largest shareholder in News Corp. after the Murdoch family, which controls nearly 30 percent.

If accomplished, a deal also would allow Murdoch to opt out of a crushing battle in the pay television business, as telephone companies enter the market. Already, DirecTV's growth has slowed as cable rivals such as Comcast Corp. have provided high-speed Internet access and phone service over the same wire into the home that they use to deliver TV.

At the same time, the swap would return Malone to media's big leagues. Liberty's assets include the nation's largest home-shopping network, QVC, the Starz movie channels and large stakes in Discovery Communications and Barry Diller's IAC/InterActiveCorp., but Malone's status as a media mogul waned in 1999, when he sold the nation's leading cable television provider, Tele-Communications Inc., to AT&T Corp.

If he gains control of DirecTV, Malone eventually would pursue a merger with its sole rival, EchoStar Communications Corp., according to sources at News Corp., who asked not to be identified because the negotiations are private.

Executives at Liberty Media could not be reached for comment.

Federal regulators rejected a proposed combination of the nation's two satellite TV providers in 2002 as anti-competitive. However, Murdoch, 75, has said publicly that the new competition in the pay television business from telephone companies could make Washington more amenable to such a deal today.

Murdoch purchased its DirecTV holdings from General Motors Corp. in late 2003 to fill a void in a satellite apparatus that reached every corner of the globe. Among News Corp.'s satellite services are BSkyB in Britain and StarTV in Asia.

However, his enthusiasm for DirecTV has diminished in the last year because of satellite TV's technical limitations and its slowing growth, News Corp. insiders say. Satellite technology is not capable of delivering the advanced services at the core of the cable-phone rivalry.

This summer, Murdoch and Malone tentatively agreed to a widely publicized trade involving 10 News Corp. TV stations. But in mid-July, when the pair were at the Allen & Co. media conference in Sun Valley, Idaho, they discussed the DirecTV transaction, according to News Corp. insiders.

DirecTV is among several options on the table, people close to the discussions said. Malone has also expressed interest in Murdoch's regional sports channels. The talks could still break down, as they have several times in the last year, the sources said.

Under the terms currently being discussed, Liberty would swap its 19 percent stake in News Corp., which is worth more than $11 billion, for the 38 percent stake in DirecTV, which is valued at about $9 billion. Liberty, which is based outside Denver, would get another asset in the trade such as a television station and would contribute some cash so the deal would be tax-free for News Corp., sources said.

Malone has insisted on trading his stock for a hard asset owned by News Corp. rather than cash to allow him to avoid paying capital gains taxes.

Malone, a former partner of Murdoch's in several cable channels, took the Australian-born magnate by surprise in late 2004, when he doubled his stake in News Corp. by accumulating shares on the cheap when fund managers in Murdoch's native country began dumping them out of their portfolios as the company moved its headquarters to New York City and its stock listing to the New York Stock Exchange.

Although Malone has publicly assured investors and Murdoch that he had no intention to make a hostile play for News Corp., Murdoch has been obsessed with paying off Malone and eliminating any threat, News Corp. sources said.

Murdoch was expected to use his expanded powers in pay television to launch several new channels. But to date, News Corp. has created only two channels on the satellite platform, Reality TV and Fuel, a sports network.

A business news channel that would compete with NBC Universal's CNBC has been on the drawing board for more than a year and is expected to be launched in early 2007. Since the acquisition, DirecTV's subscriber base has grown by a third to nearly 16 million.

Malone's holdings in News Corp. date to 1999, when Liberty Media swapped an interest in the Fox/Liberty Networks sports venture for News Corp. stock. A year later, Malone exchanged a stake in Gemstar-TV Guide International Inc. for more News Corp. stock.
 

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