Wall Street mavens and people inside News Corp. are wondering: What is John Malone up to?
Liberty Media, Malone’s holding company, announced Wednesday a so-called total return swap arrangement with Merrill Lynch under which the investment house may sell 85 million voting shares of News Corp. to Liberty next April.
That’s about 8% of the voting interest, which Liberty would add to the 9% of News Corp. it acquired in January.
Deal with Merrill allows Liberty to reap the benefits of owning a large chunk of News Corp. stock without actually putting up any money now. It is especially beneficial for Liberty if News Corp. stock rises between now and April.
Under the deal, which involves 84.7 million shares of News Corp. Class B stock, Liberty must pay Merrill the difference between today’s price of approximately $17.50 per share and whatever the stock is selling for in April if the price goes down. If the price goes up, Merrill must pay Liberty the difference. Liberty also has to pay interest to Merrill on the value of the shares, which are worth about $1.47 billion.
In addition, Liberty has the option to purchase the shares outright from the investment house next April.
As with Liberty’s previous share purchase in January, News Corp. topper Rupert Murdoch appeared to have no inkling it was coming. He said during a conference Wednesday to discuss earnings that he has no idea what Malone’s planning, but “I’m not losing any sleep over it.”
The working theory on Wall Street is that Malone would eventually like to swap the shares for some of News Corp.’s media assets.