John Malone is putting his money where Rupert Murdoch’s mouth is.
Liberty Media is buying $500 million in News Corp. preferred limited shares, in keeping with an agreement inked in March between Malone’s Liberty and Murdoch’s News Corp. Investment will help finance Murdoch’s pending $6.6 billion purchase of General Motors’ controlling 34% in DirecTV parent Hughes Electronics.
Barring any unforeseen regulatory holdup, sources say deal should be completed by December.
Malone counts his current 19% stake in News Corp. as one of his favorite investments (it’s worth around $6.2 billion and comprises some 13% of Liberty’s own value); he had toyed with the idea of his own bid for DirecTV last year but ultimately decided to give his vote — and cash support — to Murdoch’s proven managerial track record with digital satellite platforms.
Transaction ups Liberty’s holding in News Corp. to 20%, technically making the Denver-based holding company the largest single equity shareholder in the company behind Murdoch, who has an economic interest of 19%. Murdoch nonetheless controls of 31% of News Corp.’s all-important voting stock.
While the deal was expected and widely commended, Liberty’s preference for shoring up its holdings in other people’s companies runs counter to Malone’s stated aim of becoming more of an operating company. In September Liberty spent $7.9 billion to take control of QVC. The home shopping net and third-ranked pay movie web Starz Encore are its only core 100%-controlled operations.
Company also owns 50% of Court TV and 49% of Discovery, both of which could be expensive to buy or sell given the tax implications. The vast bulk of Liberty value is attributed to a myriad of public and private shareholdings in media and technology companies in the U.S. and abroad.
Concerned about Liberty’s strategic options, many shareholders are still hoping it will use its still-plentiful cash reserves to repurchase its own depressed stock.
Under the agreement between the two moguls inked last spring when News Corp. made its offer for DirecTV, Liberty was obliged to exercise its $500 million investment option if News Corp. purchased Hughes within two years. If Liberty hadn’t agreed to the purchase by the end of September, News Corp. could have forced Liberty to invest within two years at a higher per-share price.