Inside Move: Voting with his wallet

Malone muscles 9% stake of News, but is he building or breaking up?

NEW YORK — John Malone‘s stealth acquisition of voting shares in News Corp. is a mystery that has Wall Street asking, “Why, why, why?”

Conclusion No. 1: Malone is contemplating a breakup or sale of Liberty assets and wants to ensure he’s firmly in bed with a strong partner who could make that process a success.

Backing up — no one’s really sure whether or not Rupert Murdoch knew that Liberty Media’s chairman was accumulating such a large position, 9.1%, of his company’s voting stock, second only to Rupe’s 30% stake.

Most analysts and fund managers are working on the assumption that Rupe did not know — and they’re hearing echoes of Malone’s one-time nickname, Darth Vader.

But Murdoch is no shrinking violet. Will there be an “Empire Strikes Back?”

“If Malone is being ruthless, he wants to sell pieces of Liberty and merge the programming assets (Discovery, Starz and QVC) with News Corp.,” speculates one media investor.

“Murdoch would buy it, retire those voting shares, take over Liberty’s stake in Discovery. It’s kind of ruthless. The old John Malone,” he adds.

The keen interest was mixed with irritation.

“While it appears to be a savvy financial maneuver, the confusing and secretive nature of the transaction may concern Liberty investors. Liberty has increasingly become unpredictable and unanalyzable,” writes Richard Greenfield, a media analyst with Fulcrum Global Partners.

“Liberty was executing meaningful transactions that impacted the underlying value of its News Corp. holdings for the past year, with investors having no idea about the changes until yesterday,” he adds.

For now, one sure thing is that Malone’s stake in News Corp. is vastly more influential that it was before.

While indications could point toward a hostile takeover of News Corp., that seems unlikely since the Murdoch conglom is well-run and on a high after its recent purchase of DirecTV.

Many on Wall Street say they would be surprised if relations between the two moguls, who have been allies as well as rivals, had deteriorated to that point.

Also, Liberty said in a filing with the Securities and Exchange Commission that it has no plans to effect changes or take over the company.

If Murdoch was in the loop and the stock purchases were “friendly,” what then?

It gives News Corp. management greater control over the company, as Murdoch and Malone would control a combined 39%.

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