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Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

How News Corp., Liberty Can Save $4.5 Billion

  • Summary: New Corp. (NASDAQ:NWS) and Liberty Media Corp. (LCAPA), in talks over an asset swap that would give Liberty control of DirecTV Group Inc. (NASDAQ:DTV), likely plan on structuring the deal in such a way as to avoid paying taxes through a legal loophole that would save the two companies as much as $4.5 billion in combined taxes. The structure of the deal would essentially be the same as that used in "cash-rich" deals -- but with a relatively small portion of cash. News Corp. would likely transfer its DirecTV stake, valued at about $9 billion at current market values, along with about $2 billion in cash, to a new corporation created specially for the deal. It would then swap that corporation to Liberty in exchange for Liberty's roughly $11 billion stake in shares of News Corp. Such a move is likely to renew the spotlight on the controversial tax-related structure, used in the past by companies selling stock in other companies. The White House had sought to make it illegal, but backed down after pressure from large corporations.
  • Comment on related stocks/ETFs: The WSJ recently ran a piece on News Corp.'s attempts to dump its share in DirecTV. John Bethel has been arguing the merits of a News Corp.-Liberty Media split for some time now.

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Source: News Corp. and Liberty Media Looking to Wiggle Out of as Much as $4.5 Billion in Taxes