Liberty Media, News Corp. Continue DirecTV Negotiations
Calling DirecTV an “underleveraged asset” needing a broadband strategy, Liberty Media CEO Greg Maffei used a Wed. presentation at the UBS conference in N.Y. to make Liberty’s case for acquiring News Corp.’s controlling stake in the satellite service provider. Liberty Chmn. John Malone said earlier this fall he was close to an agreement to trade his 19% voting stake in News Corp. for 38% of DirecTV.
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Maffei hasn’t set a deadline for the transaction but has set milestones, he said. Among these is an expected May 2007 change in federal tax rules for cash-rich split-offs that would raise the operating asset requirement for such deals to about 65% from 25%. Malone and News Corp.’s Rupert Murdoch have been trying to arrange a deal with Liberty, delayed by desire to engineer a tax-free transaction through a cash-rich split-off. The goal is for any deal to minimize both companies’ tax implications, Maffei said. Liberty’s 19% of News Corp. is worth about $16 billion; News Corp.’s interest in DirecTV, $7.4 billion.
“Many people are focused on reading the body language of Rupert or Peter” Chernin, Maffei said, meaning the News Corp. chmn. and COO. “That’s not what we're focused on. We're focused on doing the right deal that makes sense for the Liberty shareholders and for the long term. It would be silly to put an arbitrary deadline on this.”
Among the more attractive aspects of DirecTV would be its availability to distribute Starz Media and other Liberty Media programming, Maffei said. Malone, long a player in the U.S. satellite business, helped create PrimeStar, which DirecTV bought. He once had a powerful distribution source in cable operator TCI, which he sold to AT&T.
“We have a host of content assets that don’t have the distribution muscle we used to have” when Malone ran TCI, said Maffei. “Having distribution assets is a great way to have a front and center seat in the construction of content assets to make sure that they have good, strong distribution,” he said.
Maffei praised DirecTV management, voicing hope CEO Chase Carey, a long-time News Corp. executive, would “want to be involved” if Liberty Media buys the controlling stake in the satellite service provider. “I think we're still optimistic about DirecTV’s strategy and we have a lot of confidence about where they're going,” Maffei said.
DirecTV has long labored on a broadband strategy, but Maffei said Liberty Media’s investment in Wildblue may give it a way to get that. Wildblue, at about 117,000 subscribers, has a satellite-based Internet access service. A new Wildblue satellite is expected to launch this week from the Arianespace center in French Guiana. The craft has transponders for SES Americom’s IP Prime IPTV service. DirecTV struck an agreement with Wildblue this year to sell its service in rural markets.