Shareholders of the News Corporation have approved a plan to swap its stake in DirecTV and $550 million cash for Liberty Media’s estimated $11 billion stake in the company. The $11 billion asset swap will increase Rupert Murdoch’s control over the company and it would transfer the DirecTV Group to Liberty Media, controlled by John C. Malone. The exchange will raise the Murdoch family’s stake in the News Corporation to 38 percent, from 31 percent. According to the agreement, signed in December, the News Corporation will buy back Liberty’s 16.3 percent stake in the company.
Under the arrangements of the deal Liberty will receive a 38.5 percent controlling stake in DirecTV, the biggest American satellite TV company, and three local Fox sports channels. In addition to it, the company will also pick up $588 million in cash, up from $550 million under the initial December agreement. The deal is however subject to approval from the Federal Communications Commission, and companies are expecting to conclude the deal by midyear.
Murdoch had been in consultation with Malone ever since the latter assume his stake in News Corp to 19 percent of its voting shares in 2004, intimidating the control of the Murdoch family, which has a 31 percent stakes. Before a deal was finally inked, News Corp has kept Malone away by putting in place a controversial ‘poison pill’, anti-takeover measure, that prevented him adding to his stake.
Murdoch has invested in DirecTV in December 2003 with a view to establish a global satellite TV business and to help distribute News Corp. networks. There were also some concerns pertaining to the fact that DirecTV and the satellite TV companies have a relative inferior position compared with cable. However, experts have said that the deal will eliminate the risks that this asset could potentially have problems.
With the increased control of DirecTV it would facilitate the return of Malone to the TV distribution industry and it also marks Murdoch’s exit from the U.S. satellite market.
