Liberty-DirecTV deal settles Murdoch-Malone dispute


NEW YORK -- Liberty Media Corp. will gain control over the satellite television broadcaster DirecTV Group Inc. in a deal that will settle a long-running dispute between two powerful media figures, Rupert Murdoch and John Malone, according to a person with knowledge of the discussions.

Murdoch, who controls News Corp., has reached a verbal agreement with Malone to swap News Corp.'s 39% interest in DirecTV for Liberty's 19% voting stake in News Corp., according to the person who spoke Thursday on condition of anonymity because the deal has not yet been announced.

The agreement, assuming it is finalized, would settle a showdown that began two years ago between two of the most powerful figures in the media industry.

The person familiar with the talks said the deal would likely be announced within two weeks, confirming reports Thursday in The New York Times and The Wall Street Journal. The deal had been widely expected and was discussed by the two parties for several months.

Malone surprised Murdoch two years ago by suddenly accumulating a stake in News Corp.'s voting shares, potentially challenging Murdoch's control of the global media conglomerate he built. News Corp. adopted anti-takeover defense measures that were later challenged by shareholders.

In addition to News Corp.'s controlling stake in DirecTV, the person familiar with the talks said Malone's Liberty Media will also get three regional cable sports channels and $550 million in cash. The deal was designed to save both parties huge tax bills since it is structured as a swap instead of a sale of assets.

Richard Greenfield, an analyst with Pali Capital, said in a note to investors that the deal could be positive for News Corp. by giving it a tax-free way to get out of what he called a "weak asset" in a deal that also amounted to an $11 billion repurchase of its own shares.

For Malone, the deal allows Liberty to become more of an operating company. Liberty has long been seen by many investors as a complicated company with many passive investments in other companies.

News Corp.'s non-voting Class A shares rose 87 cents, or 4%, to $22.61 on the New York Stock Exchange, while shares in Liberty Capital, a tracking stock for Liberty's non-interactive media assets such as Starz Entertainment, rose $2.84, or 3.2%, to $90.77.

Liberty's CEO Greg Maffei told an investor conference Wednesday that gaining DirecTV would be "attractive" to Liberty by bolstering its ability to distribute programming such as television shows and movies, but he didn't discuss the status of the talks with News Corp.

The deal would also bolster Murdoch's control over News Corp., a global media conglomerate that owns the Fox broadcast network, a large group of television stations, the Twentieth Century Fox movie studio and the social networking site MySpace. Murdoch's family has about 30% of the company's voting interest.