- The Washington Times - Tuesday, November 9, 2004

From combined dispatches

Rupert Murdoch’s News Corp., the world’s fifth-largest media company and owner of the Fox broadcast network and Fox News Channel, adopted a plan to thwart any hostile takeover after John Malone’s Liberty Media Corp. said it planned to boost its stake in the company.

The moves come just as News Corp. is moving its legal home from Mr. Murdoch’s native Australia to the United States, where it holds many entertainment assets including the Fox holdings, the Twentieth Century Fox movie studio and DirecTV satellite.

Last week, Mr. Malone’s investment vehicle, Liberty Media Corp., made a transaction with Merrill Lynch that could allow Liberty to increase its voting stake in News Corp. from 9 percent to 17 percent in the next six months. Under the deal, Liberty would be able to convert some of its nonvoting stock in News Corp. to voting shares.

News Corp. said it would adopt a “poison pill” defense and offer half-price stock to shareholders if Liberty’s stake exceeded 17 percent, making it more difficult for outsiders to wrest control from the Murdoch family.

The Murdochs own nearly 30 percent of News Corp. Mr. Murdoch, 73, has been grooming his sons, James and Lachlan, to take over the company one day.

“It’s a significant poison pill,” said Paul Xiradis, who helps manage more than $1.5 billion at Ausbil Dexia Ltd. in Sydney, Australia.

The moves indicate a cooling in relations between Mr. Murdoch, who built News Corp. into a major global media empire starting with a newspaper in Australia, and Mr. Malone, a pioneer of the cable television industry who is now a formidable media investor.

Mr. Malone’s Englewood, Colo., company owns the home shopping network QVC and the Starz movie networks as well as stakes in Discovery Communications Inc. and Court TV, with other properties.

Fox News had 8.1 million viewers on election night, trouncing other cable stations, according to Nielsen Media Research. And it has bridged the gap with CNN in how much it can charge for advertising, the New York Times reported yesterday.

Mr. Malone might be trying to pressure Mr. Murdoch to sell Liberty some cable networks or buy networks from Liberty, analysts including David Joyce at JB Hanauer & Co. said.

“I don’t think Murdoch had another choice to effectively and quickly deal with the threat from John Malone,” said Richard Greenfield, an analyst with Fulcrum Global Partners in New York.

He rates News Corp. shares “buy” and doesn’t own the stock.

The half-priced stock also would be issued if another shareholder buys more than 15 percent of News Corp.’s voting shares.

Mr. Malone, 63, ran cable-TV provider Tele-Communications Inc. (TCI) for more than 25 years. He kept control of Liberty Media, TCI’s cable-programming arm, after selling TCI to AT&T; Corp. in 1999.

Mr. Malone’s politics are “staunchly conservative,” according to a 2002 profile in Cable World, an industry trade publication. He tells people “without hesitation” that Ronald Reagan is his hero.

A report last month in Broadcasting & Cable, another industry journal, listed Mr. Malone among media tycoons who had given money to the Republican National Committee or President Bush’s re-election campaign.

Other members of this club are Mr. Murdoch, Clear Channel Communications Inc. Chairman L. Lowry Mays and movie and television producer Jerry Bruckheimer.

A larger voting stake in News Corp. could help Mr. Malone pressure Mr. Murdoch into a transaction, Mr. Joyce said last week.

Transactions that Mr. Malone might be interested in include a purchase of News Corp.’s stake in the National Geographic Channel, a sale of Liberty’s Starz networks to News Corp. or a deal to show movies from News Corp.’s Fox film studio on Starz, he said.

“As a general policy, we are against poison pills,” said Scott Black, president of Delphi Management Inc, which owns shares of Liberty and News Corp. American Depository Receipts among its $1.1 billion under management.

Mr. Black said he doesn’t think Mr. Malone poses a serious threat to News Corp.

“You would have to have multibillions to take out News Corp.,” he said. “Rupert Murdoch doesn’t want to sell the company.”

Mr. Malone’s company said last week it has an option to buy 8 percent of News Corp.’s voting shares from Merrill Lynch & Co. The News Corp. share offer would be triggered by the additional purchases.

Concerned that the moves could be expensive to Mr. Murdoch, investors sent the company’s shares down 4 percent in Australia. In New York, News Corp.’s shares fell 66 cents, or 3.7 percent, to close at $17.10 on the New York Stock Exchange, where they are trading on what’s called a “when-issued” basis ahead of their formal listing on the exchange Friday. Liberty’s shares fell 12 cents to close at $9.51 on the NYSE.

Earlier this month, News Corp. gained Australian court approval for the company to be reincorporated in Delaware, from Australia. Liberty disclosed its plans immediately after the court approval, News Corp. said.

Before the move, Mr. Murdoch’s company agreed to measures that protect shareholder rights after some investors threatened to oppose the company’s departure from Australia. News Corp. agreed to not issue stock that carries more than one vote and to allow investors with a combined 20 percent stake in the company to call a shareholder meeting.

Chris Baker contributed to this report.

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