Diller Bids to Sell Notes Acquired in Fox Deal : Transaction: The former studio chairman can convert recent holdings into rising News Corp. stock.

Former Fox Inc. Chairman Barry Diller, who resigned as head of the film and TV studio in February, is seeking regulatory approval to sell $33.3-million worth of notes he acquired in connection with an apparent settlement agreement earlier this year.

The disclosure came in a registration statement filed with the Securities and Exchange Commission by News America Holdings, the parent company of Fox. News America is the U.S. subsidiary of News Corp., the Australian media conglomerate controlled by Rupert Murdoch.

According to the filing, Diller privately acquired the notes for cash and may sell any portion of them in the future. The notes do not pay interest, but accrue at 7.75% annually. They would be worth $66 million if held to maturity in 2002.

However, the notes are also exchangeable at any time into News Corp. stock. That could make them worth considerably more than their face value if the stock continues to rise. Diller, who held 2 million shares in News Corp. when he resigned, has trimmed his holdings over the last six months to 874,686 shares.

A News Corp. official said that Diller acquired the notes independently, and unrelated to any settlement agreement between the former executive and the company. Diller declined comment.

But a source close to the situation said that Diller was owed about $50 million at the time he left Fox, based on his contractual rights to 5% of the studio’s pretax profits over the next 2 1/2 years.

The source said Diller decided to exchange his ongoing profit participation for the notes for tax purposes, and because of his belief that News Corp. stock would likely increase in value over the next several years.

The notes that Diller acquired were part of a News America Holdings public offering last March with a face value of $641 million.

Separately, a Fox source confirmed that Diller had sold back to Murdoch the 25% stake in preferred shares he held in Fox’s seven TV stations. After he left, Diller also acquired the corporate jet he used that was owned by News Corp.