Murdoch Still Eyeing Liberty’s News Corp. Stake

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News Corp. chairman Rupert Murdoch said Tuesday night that he is in negotiations to acquire Liberty Media’s 19% voting interest in News Corp. stock, but he was less clear on what that deal may actually involve.

News Corp. has been trying to buy back Liberty’s voting stake in the company -- second only to the Murdoch family’s -- for more than one year. On a conference call with analysts to discuss fiscal-fourth-quarter results, Murdoch said News Corp. is “actively in talks with Liberty at this moment.” He declined to elaborate.

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,” he said of possible assets that could be exchanged for the stake. “There is no favorite at the moment.”

Liberty chairman John Malone fueled speculation that News Corp. was willing to give up some of its TV stations in return for the voting stake at Liberty’s annual investor conference in May. Although Malone said at the time that a station swap was a possibility, published reports since then have said that News Corp. could give up as many as 10 of its owned-and-operated stations in secondary markets like Salt Lake City; Greensboro, N.C.; and Ocala, Fla.

Liberty’s News Corp. voting shares are valued at about $3 billion, while News Corp.’s 35 television stations are worth about $9 billion, according to some analyst estimates. However, the bulk of that value is likely tied to the larger stations in the group, meaning that a station deal would involve small-market properties and cash.

Adding to the confusion was News Corp.’s announcement that it extended its shareholders-rights plan -- a poison pill enacted after Liberty acquired the voting stake in late 2004 -- through 2007. As part of a settlement with shareholders who sued last year after News Corp. automatically extended the plan, the company agreed to put the poison pill to a shareholder vote at its next annual meeting.

On the call, Murdoch said the decision to extend the rights plan has no impact on a Liberty deal. “I think we will maintain the rights plan until such time as we completed the deal, if there is to be a deal, with Liberty, and we do expect one,” he added on the analyst conference call.

For the quarter, revenue at News Corp. was up 11% to $6.8 billion and operating income rose 8% to $1 billion, driven mainly by gains in its filmed-entertainment and cable-network units. At the cable networks, led by Fox News Channel, operating income rose 42% in the quarter to $194 million on revenue of $934 million (up 12.4%).

Cable revenue could go even higher in the coming fiscal year, when many of Fox News Channel’s carriage deals with cable and direct-broadcast satellite service providers expire. News Corp. has been said to be seeking as much as $1 per subscriber, per month from cable operators and DBS providers for Fox News, a substantial increase from its current 25-cent fee. The Fox News deals are expected to come up for renewal later this year and into early next year.

“We look forward to commencing the renewals of Fox News Channel during the upcoming fiscal year,” News Corp. chief financial officer David DeVoe said on the conference call.

In other cable news, News Corp. chairman Peter Chernin said the company is on track to launch its planned Fox Business Channel in early 2007. However, he added, News Corp. will not launch the channel without substantial carriage in place, which he estimated to be at least 30 million homes.

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