Diller Expected to Take Over Cable Firm : Media: Home Shopping Network stock gains 12% on reports that he will become chairman next week.

Reports that media mogul Barry Diller will take control of Home Shopping Network Inc. drove the stock of the St. Petersburg, Fla.-based cable company up nearly 12% on Friday, making it the most actively traded issue on the New York Stock Exchange. Shares of the unprofitable shopping channel climbed $1, to close at $9.50. Diller is expected to become chairman of the company late next week as part of a stock swap with Liberty Media Corp., the company’s largest shareholder.

Liberty, the programming arm of cable giant Tele-Communications Inc., will swap its 41% stake and voting control of Home Shopping for an interest in Diller’s television station group, Silver King Communications Inc., according to a report in USA Today. Diller took control of Silver King in September.

Diller, who built the Fox network from scratch for Rupert Murdoch, is trying to use Silver King as the foundation for another new network. Silver King, a group of 12 UHF stations, currently relies almost exclusively on home shopping programs, but Diller hopes to transform it with a mixture of local news, entertainment and sports. Home shopping would be a part of the new formula, though not necessarily in its current form.

Diller is already on the board of Home Shopping, and has some experience in the industry: He cashed in an investment in home shopping leader QVC Inc. in February for an estimated $100 million after a disagreement with his partners.

Reports of his latest play did not surprise Wall Street analysts. “It’s all the same guys fishing in the same pond,” said Jeffrey Logsdon at the Seidler Cos. in Los Angeles.

Diller took over Silver King with the help of Tele-Communications, which owned an option to buy control of the television company. Tele-Communications, headed by cable magnate and sometime Diller ally John Malone, transferred the option to Diller in exchange for Liberty Media’s receiving a 20% equity stake in Silver King.

Under the deal disclosed Friday, Liberty could end up with half of Silver King as part of the stock swap, according to analysts.

Neither Diller, Liberty Media nor Home Shopping officials could be reached for comment.

The transaction would be a reunion for the station group and the cable channel. Silver King was formed in 1986 as the distribution arm of Home Shopping but was spun off in 1992, after Liberty Media acquired the network. Today Home Shopping has 30 million subscribers. Silver King, in turn, became a public company with stations in eight of the largest 12 television markets.

Home Shopping Network has been losing ground to industry leader QVC Inc., which reaches nearly twice as many homes. The channel lost $17.7 million in the third quarter as a result of a shift in strategy aimed at sprucing up its image and upgrading its merchandise, mimicking the successful formula of QVC.

Paradoxically, that formula originated with Diller, who became an investor in 1993 after leaving Fox. Though he succeeded in repositioning the network, Diller ran afoul of the interests of Comcast Corp., the cable operator that jointly owned the channel with Tele-Communications.

Diller, hoping to use QVC as a vehicle to build a programming empire, first lost out to Viacom Inc. in a bid for Paramount Communications. He then struck a deal to take over CBS Inc. But federal cross-ownership rules would have forced the two cable shareholders to reduce their stakes in the broadcaster, prompting Comcast to make a tender offer for the QVC shares it didn’t already own.

In February, TCI and Comcast bought out Diller’s stake in QVC.

Still, Malone and Diller remained close. Sources say Malone used Silver King as a lever to get Diller to reinvigorate the troubled Home Shopping Network. As part of the Silver King transaction in September, Diller, Malone and Peter Barton, the president of Liberty Media, all joined the board of Home Shopping.

Gerald Hogan, the president and chief executive of Home Shopping, stepped down. David Dyer, the chief operating officer, became president. But the chief executive position and chairmanship remained unfilled.

The announcement of the transaction had been scheduled for the Western cable show to be held in Anaheim next week.