Analysts Ponder Malone’s Course

Jun 20, 2005  •  Post A Comment

What exactly is John Malone up to?

That’s the question some observers are asking these days as the Liberty Media chairman juggles a number of activities, each of which has the potential to alter the media landscape and which in combination could re-establish Mr. Malone as Big Media’s consummate deal-maker.

Among the balls in the air for Mr. Malone: the continuing negotiation between Liberty and Rupert Murdoch’s News Corp. over Liberty’s 18 percent voting stake in Mr. Murdoch’s company; speculation that Mr. Malone’s recent resignation from the Cablevision Systems board is a precursor to his pursuit of Cablevision’s cable channels; and his continued efforts to simplify the structure of Liberty.

Mr. Malone was once a force in the media and entertainment community and the voice of the cable industry; now his star has faded somewhat as Liberty has struggled amid shareholder dissatisfaction with the company’s status as a holding company and not an operator of media assets. Liberty’s shares have tumbled to just over $10 a share from around $25 a share five years ago. In the meantime, others, such as Comcast Chairman and CEO Brian Roberts, have taken center stage.

As Mr. Roberts assembled what is now the nation’s largest cable operation, Mr. Malone has turned his attention overseas, cobbling together cable systems in Europe, Asia and Latin America. The efforts culminated last week in the creation of Liberty Global, which combines Liberty Media International with UnitedGlobalCom, a company that LMI controlled. He is also in the process of spinning off his 50 percent stake in Discovery Communications and 100 percent stake in Ascent Media into a new public company to be called Discovery Holdings.

But while those activities have garnered some interest from Wall Street, it is Liberty’s voting stake in News Corp.-which ranks second to the Murdoch family’s-that has tongues wagging. Mr. Malone has been cagey about what he’d like from News Corp. in order for him to relinquish the voting control of the voting stake, but many analysts have speculated he might give up the voting shares for a cable channel or two.

For months News Corp. and Liberty officials have been working toward a resolution, but just last week News Corp. launched a stock buyback program involving up to $3 billion worth of shares, which several analysts speculated was an indication that the News Corp.-Liberty talks might be stalling.

Indeed, News Corp. officials have made clear to investors in the past that they would not launch a buyback while negotiating with Mr. Malone, Merrill Lynch analyst Jessica Reif Cohen noted. However, Ms. Cohen thinks the negotiations between the two moguls will continue, as News Corp., in her view, prefers to repurchase the shares in question.

And while that saga continues, some analysts have begun speculating what was behind Mr. Malone’s decision earlier this month to step down from the Cablevision board just three months after he joined it. Mr. Malone’s cited his ownership of programming assets through Liberty as a potential conflict of interest with Cablevision’s ownership of channels AMC, WE: Women’s Entertainment and IFC.

That has led some to wonder whether Mr. Malone might be preparing a deal to acquire the Cablevision cable networks or perhaps combine them with the Discovery Holdings spinoff.

A Liberty spokesman did not return a call seeking comment.