Liberty Media, News Corp. Plan to Launch Firm

Liberty Media Corp., AT&T; Corp.’s cable-television programming unit, and Rupert Murdoch’s News Corp. agreed to combine some of their satellite and TV assets into one company that will sell shares this year.

The announcement follows a Los Angeles Times report last week of negotiations between the two media companies.

Liberty, run by cable pioneer John Malone, will double its stake in News Corp. to 18%, becoming the second-largest shareholder after the Murdoch family. Liberty also will get a stake in Sky Global Networks, the biggest satellite-TV provider, which Murdoch said will be worth $40 billion after the offering.

News Corp. will get Liberty’s 21% stake in Gemstar-TV Guide International Inc., worth $6 billion, in the transaction. News Corp. already owns 21% of Gemstar, which holds patents for electronic TV program guides. Analysts said the agreement represents a vote of confidence by Malone in the Sky Global venture, which is scheduled to go public this year.

“John Malone is a very astute investor,” said Angela Auchey, an analyst at Federated Investment Management Co., which owns about 3.3 million News Corp. shares and about 6.1 million of Liberty. “I think Liberty supporting its IPO will help it go smoothly,” she said of Sky Global.

Several of the stocks involved in the transaction rose on the news. Gemstar jumped as much as 12%, rising $4.38 to close at $72.94 on Nasdaq. News Corp. shares closed up $2.56 at $56.38 on the New York Stock Exchange. Liberty Satellite & Technology Inc., which will hold half of Liberty’s stake in Sky Global, jumped 75 cents to close at $9.69.

Sky Global will be one of the world’s largest media companies after its IPO, with holdings in Europe, Asia and Latin America as well as the U.S. Englewood, Colo.-based Liberty Media will own about 6% of Sky Global, and News Corp. will own the rest, Murdoch said on a conference call.

Malone, 59, and Murdoch, 69, have been business associates for many years, investing in some of the same companies. Some investors and analysts have speculated that Malone may covet an even bigger piece of Sydney-based News Corp., the world’s fifth-largest media company.

“I think he is using all the financial engineering he can find to chip away at News Corp. in the long run,” said Vick Khoboyan, an analyst at Financial Management Advisors in Los Angeles, which owns 125,700 Gemstar shares and about 300,000 of Liberty. “Rupert Murdoch is getting up there in age.”

The two men, through their companies, were both major investors in TV Guide Inc., which Gemstar acquired in July for $14.9 billion to form Gemstar-TV Guide. Liberty and News Corp. each received 21.3% stakes in Gemstar, much larger than the 9.7% stake held by the company’s chairman and chief executive, Henry Yuen.

After the transaction is completed, News Corp. will own 42% of Gemstar-TV Guide. Gemstar executives couldn’t be reached for comment.

Liberty Media has invested about $50 billion in many cable- TV, telecommunications and Internet companies, partly to get more ways to distribute programming from cable networks it owns, such as the Discovery Channel. Liberty investors often compare it to a mutual fund of media companies.

Sky Global Networks could raise $5 billion when it sells shares later this year, analysts said, making it the largest initial public offering for a media company.

Analysts have said Murdoch could use Sky Global stock as a currency to buy DirecTV, the No. 1 U.S. satellite-TV service that’s owned by General Motors Corp.’s Hughes Electronics unit. Detroit-based GM, the world’s largest auto maker, has said it is considering all options for the unit, including a sale. Fast-growing DirecTV now has more than 8.7 million subscribers.

“We would be interested if GM decided to do anything,” Murdoch said Wednesday. He declined to comment further.

Hughes shares fell 62 cents to $36 on the NYSE. The El Segundo, Calif.-based company has a market value of $45.2 billion.

Murdoch is chairman and chief executive of News Corp., and his family owns about 30% of the company’s shares.

Pasadena-based Gemstar is the No. 1 distributor of interactive TV program guides, which help viewers find shows by category and time on digital TV systems with hundreds of channels. Gemstar also owns TV Guide magazine, one of the largest weekly publications in the U.S.