NEW YORK — Rupert Murdoch’s cash-happy News Corp. said Monday that it has approved the repurchase of up to $3 billion in stock, signaling that talks to buy out John Malone’s sizeable and unwelcome stake in Murdoch’s conglom have faltered.
Wall Streeters said the News Corp. board wouldn’t have endorsed the stock buyback plan were it close to striking a deal with Malone’s Liberty Media, whose stake is valued at more than $8 billion.
Malone caught the generally shrewd Murdoch off guard earlier this year when he bought up enough News Corp. stock to give him an 18% interest — too close for comfort to the Murdoch family’s 29.5% controlling stake.
The News Corp. board immediately adopted a poison pill provision effectively blocking Malone from launching a hostile takeover bid.
Last month, Murdoch reiterated that negotiations with Malone were ongoing and that a deal might even be announced by August. News Corp. execs also said a stock buyback was unlikely until the Malone matter was resolved.
Merrill Lynch media analyst Jessica Reif Cohen said negotiations have now likely “stalled.”
“It is possible that the decision to announce a share buyback is meant as a signal to Liberty that News Corp. is not satisfied with the tone and/or the pace of negotiations,” Cohen wrote in a note to investors, adding that News Corp. has made it clear it would extend the poison pill.
News Corp. execs have indeed indicated in recent days that the conglom is in no rush to strike a deal with Malone unless the terms are agreeable.
At the same time, Reif Cohen and other analysts said News Corp. still has plenty of room to negotiate with Malone if it wants, even with the stock repurchase plan announced Monday.
News Corp., with total assets of approximately $56 billion, has roughly $6 billion cash on hand. And its movie studio, 20th Century Fox, is sounding the victory cry at the box office with “Mr. & Mrs. Smith” and “Star Wars: Episode III — Revenge of the Sith.”
Analysts said the buyback could help News Corp.’s sluggish stock price by returning value to shareholders.
Like other media congloms, News Corp. maintains its stock is undervalued.
News Corp. shares closed up 43¢, a gain of 2.55%, at $17.31 on the news Monday.
Conglom said the buyback should be completed within two years and that it plans to repurchase roughly equal amounts of voting stock and non-voting stock.
Under this scenario, analysts said the Murdochs’ controlling stake would increase to 32%, Malone’s to 20%.