It's Time for a Liberty Media--News Corp. Split (LCAPA, LINTA, NWS)

John Malone would love for Liberty Media (LINTA) to do a deal ridding itself of its News Corp. (NWS) stake. Rupert Murdoch would love to rid himself of Malone. Because Malone's Liberty owns 18% of News Corp., and this makes Murdoch uncomfortable.

As yesterday's Lex Column in the Financial Times points out, Murdoch has been looking for a way to buy Malone out:

That must look more attractive for Mr. Malone now that News Corp. shares have recovered and his roughly $10bn stake is showing a bigger profit. Meanwhile, Mr. Malone’s obsession with tax leakage may have been heightened by the recent creation of Liberty Capital (LCAPA), a tracking stock. Most of the new entity’s value is tied to the performance of large passive investments in media or telecoms companies. And one key lever to maximise the share price will be minimising roughly $6bn of deferred tax liabilities on those stakes.

Lex points out that if Liberty swapped its News Corp. shares for some TV stations or other media assets plus cash, its resulting tax bill could be minimized. The benefit for Murdoch -- in addition to Malone no longer being around to threaten his family's control of News Corp. -- is the deal could be done without paying Liberty a controversial premium. Lex goes on to say the tax savings alone might be enough to keep Malone happy.

In addition, such a deal could fit in with News Corp’s share buy-back program. It would help clear the air for investors worried about how the Malone/Murdoch stand-off ends. And it might help avoid a shareholder revolt in October led by Mr Malone against News Corp’s plans to extend its poison pill. There is no guarantee of a deal. Mr Malone could try riding News Corp’s shares further. And there would be the thorny issue of valuation and which asset to swap. But the logic is there for the two sides to get talking again.

It's made sense to get this done for a while. I remain hopeful and patient. And I continue holding both Liberty Media tracking stocks -- LCAPA and LINTA.