NEW YORK: John Malone's entertainment group Liberty Media has exercised its right under a March 2003 agreement to buy US $500 million of News Corp preferred limited-voting ordinary American Depositary Receipts (ADRs) at $21.50 apiece.
News Corp released a statement stating that the transaction is expected to close in two weeks. Dow Jones has indicated that the deal gives Liberty another 23.3 million ADRS, each of which represents four preferred limited-voting ordinary shares, or 93 million shares in total.
Analysts feel that by exercising the option now Liberty has made a major saving. As per the agreement signed in March a deadline of 28 September was placed on Liberty to exercise its option. Had it refused News Corp had until 27 March 2005, to make Liberty buy the same number of ADRs at the same price. The condition was that News Corp was by then to have acquired an ownership interest in Hughes Electronics.
The report states that the deal adds more than 1 percentage point to Liberty's stake in News Corp., giving it close to a 20 per cent economic interest in the company.
News Corp. chairman and CEO Rupert Murdoch controls almost 31 per cent of the company's voting shares. However due to the large amount of preferred stock on issue, his economic interest is closer to 19 per cent.
By the end of the year News Corp hopes to gain the final regulatory approval for the purchase of a 34 per cent stake in Hughes Electronics, the owner of DirecTV.