News Corp and Liberty eye stakes swap

Rupert Murdoch’s News Corp is considering exchanging its controlling stake in DirecTV, the US satellite operator, for the 19 per cent voting stake in News Corp owned by John Malone’s Liberty Media, according to people familiar with the discussions.

Mr Murdoch, who fought hard to acquire the DirecTV stake in an effort to secure distribution for his Fox television and cable content, is considering the swap because of the difficulty and expense of adding broadband capability to its satellite television product, a bundle of services that he has said is increasingly important to customers and which cable rivals are already offering.

Mr Murdoch’s British satellite operator BSkyB is currently adding broadband capability but regulatory differences in the US restricting access to telephone connections mean a similar strategy there is not possible.

The talks between the two media veterans, first reported on the CNBC business news channel in the US on Thursday, is the latest stage of discussions which have been going on for months.

Mr Malone secretly increased his voting stake in News Corp, in which Mr Murdoch’s family controls around 30 per cent of the voting shares, when shares became available nearly two years ago as News Corp switched its domicile from Australia to the US.

Mr Murdoch has been keen to secure that stake in order to ensure family control of the media empire that he has built up. He introduced a poison pill measure to prevent Mr Malone from increasing his stake, and shareholders will vote on its renewal at News Corp’s annual meeting on October 20.

A combination of the forthcoming vote and the rise in News Corp shares which has made Mr Malone’s stake profitable, has spurred the two moguls to try and work out a deal.

A number of asset swaps have been discussed. A deal has to include an asset swap in order to minimise the tax that has to be paid on the stake.

Assets which have been on the table include some of Mr Murdoch’s US television stations, as well as stakes in National Geographic. People familiar with the talks said DirecTV was the latest asset to be considered, but no specific deal had been agreed.

News Corp declined to comment and Liberty Global officials were unavailable for comment.

News Corp’s 38 per cent stake in DirecTV is currently worth around $9bn and Liberty’s News Corp stake is worth around $11bn.

DirecTV and its main satellite rival, EchoStar Communications, have talked about possibly merging to cut billions of dollars of costs from their operations, but regulators are not expected to easily approve such a move, which they already once prevented.