Federal regulators on Monday approved a long-pending deal allowing News Corp. Chairman Rupert Murdoch to swap his controlling interest in satellite broadcaster DirecTV Group Inc. for a larger stake in his own company.
News Corp.'s 38.4% stake in El Segundo-based DirecTV goes to former cable executive John Malone and his holding company Liberty Media Corp. Liberty also gets $550 million in cash and Fox's regional cable sports networks in Seattle, Denver and Pittsburgh in exchange for its 16.3% equity stake in News Corp.
The deal had been in the works since 2004 as Murdoch sought to consolidate his hold on News Corp.
"Rupert Murdoch doesn't want anybody controlling that much of the stock," said Larry Witt, an equity analyst with Morningstar Inc.
The deal, which is tax-free because it involves a swap of assets, amounts to a large share repurchase by News Corp., he said. Liberty's stake in News Corp. is valued at about $11 billion.
The Justice Department still must give its approval.
The Federal Communications Commission approved the deal with some conditions, saying that "the public interest benefits of the transfer outweighed the potential harms."
Liberty agreed to abide by arbitration provisions involving regional sports networks and the ability to retransmit broadcast stations that were imposed on News Corp. when the FCC approved its acquisition of DirecTV from Hughes Electronics Corp. in 2003.
Also, the FCC ordered that Liberty must end its common ownership of cable TV operations and DirecTV in Puerto Rico within one year either by reducing its ownership stake or selling one of the assets.
Liberty adds DirecTV to entertainment investments that include interests in home shopping channel QVC, Starz Entertainment, Time Warner and IAC/InterActiveCorp.
FCC Commissioner Jonathan S. Adelstein, a Democrat, dissented on part of the decision, complaining that DirecTV still does not provide access to local broadcast TV stations in "scores of markets" nationwide.
But he and fellow Democrat Michael J. Copps, who both oppose more media consolidation, said they supported the transfer of DirecTV to Liberty because it would lessen News Corp.'s holdings.
"The question here is whether we should approve the transfer of assets from one giant media conglomerate to a marginally-less-giant media conglomerate," Copps said. "Once consummated, the transaction will result in a measure of de-consolidation and somewhat less vertical integration."