Liberty to Acquire DirecTV and to Regain Sports Networks

Liberty Media will regain control of regional sports cable channels in Pittsburgh, Seattle and Denver, as part of an agreement with News Corp. Liberty will sell its $11 billion position in News Corp. and will acquire 38.6% of DirecTV Group Inc., News Corp's satellite-TV firm. However, to meet the requirements for a tax-free trade, 5% of the assets handed over to Liberty must be operating businesses, and since DirecTV is an investment, News Corp is including its three sports networks as part of the deal as along with cash. Liberty originally owned the networks, but traded them for a stake in News Corp. when the two companies established a joint-venture in the mid-90s. News Corp's revenue from its regional sports networks increased 30% from last year on rising popularity of local programming and high subscription fees paid by cable companies.
• Sources: Wall Street Journal
• Related commentary: News Corp. and Liberty Media Looking to Wiggle Out of as Much as $4.5 Billion in Taxes, News/Direct TV Swap--What is John Malone Smoking?, News Corp-Liberty Media DIRECTV Share Swap Nearly Complete, What Liberty- News Corp Deal Means for Shareholders. Conference call transcripts: News Corp. F1Q07
• Potentially impacted stocks and ETFs: Liberty Media (LINTA), (LCAPA), News Corp (NWS), DIRECTV Group (DTV). Competitors: Time Warner (TWX), Viacom (VIA), Comcast(CMCSA), EchoStar Communications (DISH), TiVo (TIVO), Cablevision (CVC). ETFs: PowerShares Dynamic Media Portfol. (PBS)

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