Murdoch And Malone Find A Way To Make Up

Rupert Murdoch and John C. Malone, who have wrangled for two years over Mr. Malones challenge to Mr. Murdochs control of the News Corporation, have made peace.

A deal may well keep the family business in Rupert Murdoch’s family.

John Malone

It was almost two years ago that Mr. Murdoch was stunned to learn that Mr. Malone, his friend and sometimes business partner, had bought a big voting stake in the News Corporation, a stake that could threaten Mr. Murdochs grip on the colossus he built over five decades.

The two men privately struck a deal this week that would have Mr. Malone take one of Mr. Murdochs once-prized assets — the DirecTV satellite service — plus other goodies in exchange for going away by selling his $11 billion stake in the News Corporation back to the company.

Mr. Malones Liberty Media is to take Mr. Murdochs 39 percent stake in DirecTV as well as three regional sports networks owned by the News Corporations Fox subsidiary, plus some $550 million in cash, according to a banker briefed on the terms.

The News Corporation would simultaneously retire Libertys 19 percent voting stake and 15 percent nonvoting interest in what amounts to a huge share buyback. Another executive close to the discussions cautioned that Mr. Malone and Mr. Murdoch have come close to deals before only to back away, but others said this was the first time the men actually agreed on terms. A full legal agreement is expected to be signed and announced within two weeks.

The deal was struck over the last day by telephone after months of talks that were largely led by Libertys chief, Gregory B. Maffei, and the News Corporations chief financial officer, David F. DeVoe. Although Mr. Malone and Mr. Murdoch speak and their relations are said to be cordial, the once-chummy moguls have not spent much time together over the last two years.

In that time, the News Corporation adopted a poison-pill takeover defense to keep Liberty at bay, and Mr. Malone once said: Half of the shareholders are afraid Rupert will die; half are afraid that he wont.

Each man will probably be able to claim victory in the contemplated deal, with Mr. Murdoch booking a gain of close to $5 billion on DirecTV since buying his stake in 2003. Perhaps more important, the buyback of Mr. Malones shares would eliminate the companys second-largest shareholder and increase the Murdoch familys voting stake to some 36 percent from close to 30 percent.

Mr. Murdoch, who is 75, has had a long-held ambition to pass the globe-spanning company to one of his six children. His son Lachlan, who resigned from the company last year, is on the board. James, another son, is chief executive of BSkyB, the British satellite broadcaster controlled by the News Corporation.

For Mr. Malone, the transaction also satisfies several financial and strategic objectives — not least of them being the ability to cash in on his big nonoperating stake in the News Corporation without paying taxes. But it would also put the onetime king of cable television back in the big leagues of companies that sell video services in the United States and could lead to a further reorganization of Libertys programming assets, which include half of Discovery Communications, the QVC home-shopping channel and the Starz pay television service. Mr. Malone once led the nations largest cable television company, Tele-Communications Inc., before selling it in 1999.

Mr. Malone and Mr. Maffei have said their goal is to create operating businesses out of the companys diverse assets. Speaking hypothetically, Mr. Maffei told a media conference held in New York yesterday by the firm UBS that the company had various options for DirecTV that could potentially include trying to merge it with a rival, EchoStar, or with a telephone company seeking to expand its video efforts.

DirecTV is the nations largest satellite broadcaster, with 15.5 million subscribers as of June 30, and another 1.7 million subscribers in South America.

Mr. Maffei declined to comment for this article, as did a News Corporation spokesman.

Mr. Murdoch doggedly pursued DirecTV for years before persuading General Motors to sell him control in 2003. One reason he appears willing to sell only three years later is the uncertainty surrounding how satellite services will offer nonvideo services like high-speed Internet access to compete with cable and telephone rivals.

The sports networks operated by Mr. Murdochs Fox subsidiary are in the mix because for the deal to be a tax-free spinoff for both parties, it needed to include a business that the News Corporation has operated for more than five years that represents more than 5 percent of the transactions value.

In their dance over which assets to swap, Mr. Murdoch and Mr. Malone previously looked at other News Corporation businesses including the companys stake in the National Geographic cable channel and some television stations.

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