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Liberty Media Controls DirecTV |
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NEW YORK, Dec. 26, 2006/Satnews Daily/ ― News Corporation has announced that it had signed a share exchange agreement with Liberty Media Corporation giving former cable titan John Malone control of DirecTV, America’s biggest satellite TV provider.
Under the terms of the agreement, Liberty will exchange its entire 16.3 percent stake (324.6 million Class A and 188 million Class B shares) in News Corporation for a 38.4 percent stake (470.4 million shares) in the DirecTV Group, three Regional Sports Networks (FSN Northwest, FSN Pittsburgh and FSN Rocky Mountain) and $550 million of cash, subject to a working capital adjustment.
“We are happy to become the largest shareholder in the world's largest satellite television provider. Chase Carey and the DirecTV team have done a fantastic job, and we look forward to the strategic benefits of them joining the Liberty family,” said Liberty president and CEO Greg Maffei.
“During 2006 we converted many passive investments into strategic operating businesses, but this transaction is the largest and most important. DirecTV and the regional sports networks represent a critical step in our efforts to transform Liberty Media into a well-positioned, focused operating company,” he added.
“We are extremely pleased with the successful, tax-efficient conversion of our News holding. Our investment in DirecTV will create financial, operating, and strategic flexibility,” said Liberty chairman John Malone. “Liberty's ownership of News has created tremendous value for our shareholders, and we are grateful to Rupert Murdoch and News management.”
News Corp. said it believes the transaction will be immediately accretive to the company’s earnings per share and will accomplish an approximately $11 billion stock buyback representing approximately 16 percent of the outstanding stock.
The share exchange agreement is subject to various regulatory approvals and an affirmative vote by a majority of holders of News Corporation’s Class B common stock, other than the Murdoch family and Liberty. If approved, the transaction is expected to be completed in the second half of calendar 2007, News Corp. said. The transaction has been unanimously approved by the boards of News and Liberty, is expected to close in mid-2007, and is subject to regulatory and News Corp shareholder approvals and the receipt of a private letter ruling from the Internal Revenue Service.
Following completion of the transaction with Liberty, News Corp. said it intends to redeem its stockholder rights plan and will consider eliminating its staggered board.
It is expected that Chase Carey will continue to serve as DirecTV president and CEO, and Liberty will appoint directors to fill the board seats currently held by News representatives.
Carey said they welcome Liberty to DirecTV. “They bring a wealth of expertise in media and technology that will be invaluable. I have known both John Malone and Greg Maffei for over 10 years which gives me great confidence this transition will be smooth, and we will move forward without missing a beat,” he said.
The deal has been expected for sometime. Observers say control of DirecTV would give Liberty a powerful distribution outlet for its networks such as Starz and QVC that Liberty lost when Malone sold cable company Tele-Communications Inc. to AT&T in 1999.
The deal is expected to shake the satellite, Internet and media industries anew. Barely three years after Murdoch acquired a 34 percent stake in Hughes Electronics, operator of the largest American satellite TV system DirecTV from General Motors for $6 billion, now he wants out apparently to remake his media empire in a digital and Internet marketplace governed by new rules.
The reason for the proposed sale is big media companies feel they no longer need even TV to watch TV programs anymore. Anyone with a computer and a broadband connection, including Apple’s new iPod, can watch full length videos.
Recently, cable and phone companies have also been upgrading their networks to offer service bundles including TV, fast Net and phone, to the detriment of the satellite TV industry. Telephone companies are soon to begin offering video as well.
In July last year, News Corp. also invested $580 million in an interactive web startup MySpace. MySpace offers an interactive, user-submitted network of friends, personal profiles, blogs, groups, photos, music, and videos. Sources say MySpace is currently the world's fourth most popular English-language website, the sixth most popular website in any language, and the third most popular website in the U.S. with claims of 106 million accounts as of September 8, 2006.
The idea of sinking in billions more into DirecTV doesn’t look practical when News Corp., with only half a billion investment in MySpace, has created a highly competitive domestic interactive market with potential earnings of billions of dollars.
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