Liberty’s Malone seeks bigger piece of AOL TW

May 27, 2002  •  Post A Comment

John Malone has his sights set on AOL Time Warner.
By jockeying for a bigger stake in the company, Mr. Malone and his Liberty Media Corp. could in fact help solve some of the media giant’s nagging problems.
Asked by analysts at Liberty’s annual investors meeting here last week whether he would try to exercise more influence at AOL Time Warner with a bigger stake, Mr. Malone said, “Sure we would.”
And how big is big? “At least” the size of Liberty’s 20 percent stake in Rupert Murdoch’s News Corp., Mr. Malone told Electronic Media. “We would want a lot of it.”
Getting from Liberty’s 4 percent nonvoting stake in AOL Time Warner to a much bigger one will require a favorable consent decree ruling from the courts and successful negotiation of a complex swapping of critical strategic assets that Liberty has and AOL Time Warner and others want.
For instance, Mr. Malone said he could flip Liberty’s 42 percent stake in QVC, valued at $6 billion, to AOL Time Warner as part of the consideration for a larger stake in the media conglomerate. AOL Time Warner could use the QVC stake as a valuable bargaining chip with Comcast Corp. in its sale of the 27 percent in Time Warner Entertainment that Comcast will inherit when it completes its acquisition of AT&T Broadband. Comcast, which wants out of the troubled partnership, could realize important cash flow and tax gains by owning more of QVC, which it controls.
Other Liberty assets AOL Time Warner would be interested in that could be swapped for an increased overall stake include Liberty’s 50 percent stake, valued at $850 million, in Court TV (Time Warner owns the other half) and Liberty’s 10 percent stake in E! Entertainment, valued at $470 million. Liberty has built its wealth and power partly by leveraging such investments into more valuable stakes in bigger media companies. However, Mr. Malone said there are no current talks to sell Liberty’s 50 percent stake in Discovery Communications.
“When these assets become more valuable to someone [other] than us, we’re not reluctant to sell,” Mr. Malone told investors. “We’re in the business of moving goods.” While there have been some early discussions, nothing is imminent. But clearly the door to communications is open, and such negotiations will be driven by AOL Time Warner’s need to improve its stock price and balance sheet.