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Murdoch May Buy Out Malone

8/11/2006 8:00 PM Eastern

News Corp. chairman Rupert Murdoch may be close to finally getting John Malone off his back, announcing Aug. 8 that he was in negotiations with the Liberty Media Corp. chairman to buy back Liberty’s 19% voting stake in News Corp.

On a conference call with analysts to discuss fiscal fourth-quarter results, Murdoch said that News Corp. was “actively in talks with Liberty at this moment,” regarding the voting stake. He declined to elaborate.

News Corp. has been trying to buy back Liberty’s voting stake in the company — second only to the Murdoch family — for more than a year.

Liberty confirmed the talks on its Aug. 9 conference call with analysts to discuss its second-quarter results, but offered few details.

“We have an ongoing dialogue with them about a host of options,” Liberty CEO Greg Maffei said on the call. “I think the dialogue is productive and headed in the right direction, but there can be no assurances whether we’ll be able to achieve a deal or for what assets we’ll likely end up with.”

It had been expected that News Corp. would swap some of its television stations in secondary markets for Liberty’s News Corp. stake. But on the conference call, Murdoch appeared to downplay that possibility.

“There are a lot of choices,” Murdoch said of possible assets that could be exchanged for the stake. “There is no favorite at the moment.”

Liberty’s News Corp. holdings are valued at about $10 billion, with about $3 billion ascribed to the voting shares. UBS Securities cable debt and equity analyst Aryeh Bourkoff values News Corp.’s 35 TV stations at about $9 billion, with the bulk of that value tied to its larger-market stations such as New York, Chicago and Los Angeles. It has been anticipated that News Corp. would offer as many as 10 small-market stations — such as Salt Lake City, Birmingham, Ala; Ocala, Fla.; and Greensboro, N.C. — and cash to Liberty for the voting stake.

Despite Murdoch’s ambiguity, Bourkoff said that he still believes the stations and cash are the most logical assets for News Corp. to swap for the Liberty-owned shares.

Bourkoff said that he expects a resolution by October, when News Corp. is slated to hold its annual shareholder’s meeting.

“The negotiations seem to still be fluid,” Bourkoff said. “Liberty probably doesn’t view it with as much urgency because my sense is that Liberty is quite comfortable owning News Corp. stock.”

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