News, Liberty may trade stakes

Liberty Media Corp. and News Corp. are close to a deal that would give News Corp. Chairman Rupert Murdoch bulletproof control of his company but force him to give up a 39% stake in DirecTV Group Inc., people close to the situation said.

Under the deal, Murdoch would trade his portion of DirecTV for Liberty’s 19% interest in News Corp. The $12-billion stake is the largest after the Murdoch family’s nearly 30% holdings.

One source said the trade could be announced as early as this week but warned that the deal could still fall apart. cable TV pioneer John Malone, who controls Liberty Media, is worried about DirecTV’s increasing value, said the source, who asked not to be named because the talks are confidential.

DirecTV’s shares have soared 26% since news of the negotiations leaked in mid-September.

They are up more than 40% since Malone got serious last summer about trading his stake in News Corp. for DirecTV. Other News Corp. assets had previously drawn the cable mogul’s interest during discussions with Murdoch that have been going on for two years.

At an investment conference Wednesday, Liberty representatives were vague about where the negotiations stood.

“We’ve talked about several alternatives, including DirecTV,” Liberty Chief Executive Greg Maffei said at the UBS conference in New York.

Should a trade occur, DirecTV would remain headquartered in El Segundo, according to several people with knowledge of the situation.

Chase Carey, a top Murdoch lieutenant, would remain CEO of DirecTV, the sources said Wednesday.

The trade would free Murdoch from fears that Liberty’s stake could fall into unfriendly hands and threaten his family’s grip on News Corp., which controls the Fox broadcast network, the 20th Century Fox film studio, Fox News Channel, TV stations and newspapers worldwide, including the New York Post.

If accomplished, a deal also would allow Murdoch to exit the pay television business just as telephone companies are entering the market. Already, the growth of DirecTV, the nation’s leading satellite provider, has slowed as cable rivals such as Comcast Corp. provide high-speed Internet access and phone service over the same wire into the home that they use to deliver TV.

Malone would reemerge as a media power. Liberty’s assets include the nation’s largest home shopping network, QVC, the Starz movie channels and large stakes in Discovery Communications and Barry Diller’s IAC/InterActiveCorp. But Malone’s status as a media mogul waned in 1999, when he sold the nation’s leading cable television provider, Tele-Communications Inc., to AT&T; Corp.

If he gained control of DirecTV, Malone eventually would pursue a merger with its sole large rival, EchoStar Communications Corp., according to sources at News Corp., who requested anonymity. The combined satellite company might offer an attractive way for a phone company such as the new AT&T; to jump-start a push into pay TV, giving Malone an exit strategy.

Liberty Media may reduce its DirecTV stake to as little as 21.5%, according to Maffei. “Just that alone is financially attractive,” he said.

Liberty Media may also keep the stake or seek full control of the business, Maffei said.

All those options would minimize taxes, a key issue for Malone.