News Corp. strategy sets partnership for TV Guide

Deal centers on ensuring mag's future strength

NEW YORK — Rupert Murdoch’s News Corp. is planning to sell TV Guide into a joint venture between a Tele-Communications Inc. affiliate company and News Corp. itself, sources said Wednesday, in a deal likely to be worth at least $2 billion.

The deal, expected to be announced today, appears to be designed to strengthen the big-selling magazine’s future in a world in which the number of cable channels is proliferating faster than TV Guide can keep up.

While details of the deal were sketchy late Wednesday, News Corp.’s joint-venture partner is believed to be United Video Satellite Group which is controlled by TCI affiliates TCI Ventures and Liberty Media.

UVSG already operates Prevue Guide, a cable channel offering only TV listings, suggesting the joint venture will develop a more advanced cable version of TV Guide. Neither News nor TCI would comment late Wednesday.

The deal also likely bestows financial benefits on News Corp. Murdoch is believed to be hoping the deal fires up News Corp.’s stock price, which has plunged 20% in the past few weeks. News Corp. stock closed up 43¢ to $23.43 Wednesday, compared with a high in April of $29.06.

TV Guide’s circulation and operating profits have been flat for some time, and the magazine’s relevance increasingly questioned, given the difficulty any print publication has in listing every cable channel. News Corp. has tried to deal with the problem by publishing regional cable editions, but sources said Wednesday a joint venture with a cabler would strengthen News Corp.’s hand.

TCI and News Corp. have tried unsuccessfully in the past to develop an electronic version of TV Guide, however, and it’s unclear how the joint venture would overcome past problems.

Pecuniary rewards

An important bonus for News Corp. in the deal will be financial benefits from the sale, such as the transfer of debt off the company’s balance sheet to that of the joint venture, Wall Streeters said.

The magazine is not the most popular business with News Corp.’s investors, who have been pushing Murdoch for some time to sell TV Guide, analysts said Wednesday.

“It’s clearly not the sexy part of the story for News Corp.,” said Cowen & Co. analyst Gary Farber, noting that the magazine “is not a high-growth asset.”

News Corp. acquired TV Guide, along with the Daily Racing Form and Seventeen magazine, from Walter Annenberg for an astonishing $3 billion in 1988, a price Murdoch conceded later was too high. TV Guide made up the bulk of the value of the deal, and today is worth about $2 billion, analysts say, based on its annual operating profits of about $200 million — roughly what it earned when Murdoch bought it.

Stock market swing?

Analysts said Wednesday the stock market’s reaction to the joint venture would depend on the details, particularly what benefits News Corp. got from the deal.

Word of a pending News Corp. announcement leaked out on Wall Street Wednesday just as news broke that a group of mystery investors had dumped a big block of News Corp. preferred stock in a trade done through Wall Street firm Goldman Sachs for $360 million.

Goldman sold 18 million American Depository Receipts of preferred stock at $20 each, just below the preferred stock market price, but 20% below where the preferred was trading just six weeks ago. News Corp. declined comment on the stock trade.

Why stock low?

“Why would somebody sell here?” questioned Jessica Reif Cohen, an analyst with Merrill Lynch who believes that “there is no logical reason based on anything I know for the stock to be as low as it is.”

Just as puzzling is the identity of the seller, as very few shareholders owned such a big parcel of preferred stock, various sources said. A spokesman for Ron Perelman denied late Wednesday the mogul was the seller, noting Perelman had quietly sold his last piece of News Corp. preferred earlier this year.

Only the Murdoch family and a couple of big institutional investors like Capital Research have enough stock, and neither Capital nor the Murdochs were thought to be the sellers. Sources said Goldman may have put together stock from several sellers.

They could include some of the institutions that owned stock in Heritage Media Corp., acquired by News Corp. last year for preferred stock.