NEW YORK — Deal don and former cable titan John Malone is pushing and News Corp. patriarch Rupert Murdoch is shoving back in an escalating faceoff between two of the most powerful men in media.
Wall Streeters and industry insiders were abuzz Monday over Malone’s aggressive pursuit of News Corp. voting stock and News Corp.’s response: speedy adoption of a so-called poison pill clearly aimed at blocking Malone’s Liberty Media from an eventual takeover of the giant conglom.
News Corp.’s board approved the provision, formally called a shareholders rights plan, on Sunday and filed it with the SEC Monday. A poison pill can prevent Malone — or anyone else — from acquiring News Corp. simply by buying up enough shares to take control.
Wall Streeters battered News Corp. stock, calling the board move only a temporary solution and fretting over what the hostile pas de deux means for the company strategically. Most don’t think Malone is preparing a hostile takeover or a coup to unseat Murdoch. But they figure he’s looking for leverage to sell News Corp. some assets, and that worries them.
The shares, newly listed on the New York Stock Exchange, fell 3.4% to $17.58.
“It shows a weakness on Murdoch’s part. Clearly, he doesn’t know what Malone is up to. We’re worried that (Murdoch) will pay a huge premium” for Discovery or to buy back Malone’s News Corp. stock, said one media fund manager.
Liberty announced Wednesday that it had inked a deal to buy an 8% voting stake in News Corp. via Merrill Lynch. Earlier this year, it bought a 9% stake. That total 17% voting stake comes uncomfortably close to the 30% control exercised by Murdoch and his family.
The brouhaha is a glaring reminder that while Murdoch is inextricably linked with the company his father founded and he grew it into an international behemoth, his voting control is quite slender compared with that wielded by other media chiefs like Viacom’s Sumner Redstone.
Liberty’s Merrill pact “was taken without any discussion with or prior notice to News Corp.,” said News Corp.’s filing, explaining the need for the poison pill. The measure remains in effect for 12 months. After that, it would need shareholder approval, which hasn’t always been forthcoming for such a provision.
Adopting the rights plan gives the lie to Murdoch’s statement last week during a conference that he wasn’t “losing any sleep over” Malone’s move. He also acknowledged then that he didn’t know what Malone was planning.
“We thought then Murdoch could have been acting — that maybe the two of them were in it together” and Malone was protecting the stock, said one investor. Now we know better, he added.
When Liberty bought its first big chunk of voting stock earlier this year, Wall Street speculated that Liberty might be safeguarding the stock for Murdoch from other marauders.
Liberty’s most credible motivation, seeking leverage for transactions with News Corp., “has significant shortcomings from News Corp.’s perspective,” noted Credit Suisse First Boston analyst William Drewry. “It implies that the transactions (would) not stand on their own merit.”
“News Corp. could agree to buy an asset from Liberty Media in return for Liberty agreeing not to acquire more voting stock for a period of time. … The problem is what asset?” added analyst Rich Greenfield of Fulcrum Global Partners.
He doesn’t think News Corp. would consider Discovery unless Liberty acquires more than 50% control, which Malone has had trouble achieving. Starz/Encore, he added, is not terribly appealing to News Corp. since pay TV without original content is becoming increasingly marginalized and Fox movies are licensed out to HBO through 2009.
Many on Wall Street continue to think Malone ultimately wants to combine some of Liberty’s and News Corp.’s assets and spin them off into a separate company.
Greenfield mentioned, but also dismissed as unlikely, the possibility that News Corp. could counter Malone by means of the Murdoch family aggressively acquiring voting stock; the Murdoch family aggressively swapping its nonvoting shares for voting shares; or the company launching a massive $8 billion stock buyback.