NEW YORK – News Corp. (NWS) said Friday it has agreed to swap its controlling interest in DirecTV Group Inc., other assets and cash for Liberty Media's $11 billion stake in News Corp, securing Rupert Murdoch's control of his media empire.
News Corp., owner of the 20th Century Fox movie studios and MySpace, said it will exchange its 38.4 percent stake in the top U.S. satellite television operator, $550 million in cash, and three regional sports networks for Liberty Media's 16.3 percent stake in News Corp.
The deal ends two years of negotiations between long-time associates Murdoch and Liberty Media Chairman John Malone, who once helped rescue Murdoch from near bankruptcy.
Malone had quietly snapped up close to a 20 percent voting stake in News Corp. in 2004, a move that spooked Murdoch, who enacted an emergency poison pill provision to block a potential hostile takeover within days of Malone's disclosure.
The deal also marks the return of Malone as a top U.S. distributor of video and Internet services. As chief executive of the biggest U.S. cable television company TeleCommunications Inc. until its sale to AT&T in the late 1990s, he was considered the most feared man in media by critics and partners.
Former U.S. Senator and former Vice President Al Gore famously dubbed Malone "Darth Vader," the heavy-breathing villain in "Star Wars."
Malone had acquired equity stakes in companies that produce programs carried by his system as part of carriage deals with TCI, which helped him lock up big stakes in companies such as News Corp. and Time Warner Inc. (TWX) Liberty Media is the second-largest holder of Time Warner shares with a 4 percent stake as of Jan. 31, 2006.
The swap deal has been approved by the boards of both companies and is expected to close in the second half of 2007. The deal's approval is subject to regulatory review and approval from News Corp.'s B-class shareholders.
DirecTV CEO Chase Carey, a former News Corp. executive, will remain at the satellite TV service.
News Corp. says the deal will immediately boost its earnings per share.
Liberty Media Capital shares rose $4.22, or 4.5 percent, to $97.86 on Nasdaq. News Corp. class A shares rose 8 cents, or 0.4 percent, to $21.66 on the New York Stock Exchange in early trading, following the announcement of the agreement.
News Corp. is the parent company of FOX News, which operates FOXNews.com.