Buried by all the hoo-ha about Rupert Murdoch’s $US80 billion bid for Time Warner was a smaller, but just as significant move in Britain overnight by US cable mogul, and Murdoch nemesis, John Malone, who is the only person to have taken Murdoch to the cleaners in an $US11 billion bit of greenmail in late 2006.
Malone’s Liberty Global, one of his two key companies (Liberty Media is the US version) overnight bought a 6.4% stake in ITV, Britain’s dominant commercial free to air broadcaster and program producer, for $US824 million, from the Murdoch family’s UK associate, BSkyB. It has raised speculation that Malone would go further and mount a bid for ITV. That was denied and the $US14.2 billion or more needed to snap up all of ITV is beyond the likes of even John Malone, at the moment. Liberty, which paid $US23 billion in early 2013 for control of Virgin Media, Britain’s second ranked pay TV group, has a market value of $US34 billion and could be folded into ITV in a merger. But Malone has a habit of using minority stakes to achieve control.
For the seller of the ITV stake, BSkyB, the UK satellite TV group 39% owned by Fox and the Murdochs. It marks the end of one of James Murdoch’s unfortunate attempts to emulate his father. At the same time as Malone was taking Rupert Murdoch to the cleaners in late 2006, James Murdoch was launching a raid on ITV to prevent it from merging with cable operator, NTL (which later became Virgin Media). Murdoch was running BSkB and bought 17.6% of ITV, but after lengthy regulatory investigations, he was forced to sell down his stake and take massive losses.
BSkyB bought the shares in 2006 for 135 pence, sold a more than 10% a deep loss priced at 48.5 pence and sold the remainder overnight at 185 pence. James Murdoch survived that nasty loss, just as he survived the News of the World phone hacking scandal, which happened while he was running News Corp’s UK operations. That raid badyl damaged ITV, sending its share price lower and the forced sale undermined the share price even further. The management and board of ITV do not like the Murdochs for that reason.
Under chairman, Archie Norman and CEO, Adam Crozier, ITV’s fortunes have been rebuilt – with programs like Downton Abbey. but ITV is now one of the biggest content producers in the world. It has bought stakes (like Malone) in half a dozen or so producers in the US where it is now the largest independent producer of non-scripted programming (think Pawn Stars and The Real Housewives of New Jersey). That, plus the rising profits, is why Liberty was forced to pay four times the price James Murdoch received in his forced sale years ago.
BSkyB is raising cash ahead of a major reshuffle planned between it, Sky Deutschland and Sky Italia which is expected to generate more than $US10 billion cash transfer to Fox, which will receive money from BSkyB for its 100% of Sky Italia and 54% of the German business. This money can be used to help fund the cash part of the Time Warner bid of $US24 billion. That deal destroys much of James Murdoch’s responsibilities in 21st Century Fox as the junior chief operating officer reporting to Chase Carey, the real COO. Carey is seen as the architect of the assault on Time Warner, but don’t tell Murdoch’s Australian papers who have been busy deifying their dear leader once again this week.
For John Malone moving deeper into the UK TV sector has advantages because the BBC is cutting costs and BSkyB is diverted trying to bed down this pan European Pay TV merger. Malone has a history of dominating companies with large minority shareholders or holdings of just over 50% (he controlled Austar, the Australian regional pay TV operator with a stake of 54%, and sold that to Foxtel, making more than a billion. Foxtel is half owned by the Murdoch family’s News Corp). He also controls the Discovery Channel via a large minority stake, as it he controls Charter Communications, which will emerge as the winner from Comcast’s attempt to buy Time Warner Cable.
Liberty Media also has small shareholdings in Time Warner (be careful Rupert) and Viacom (which also controls CBS). It in turn majority controlled by John Malone, who controls 29% of Discovery and 27% of Liberty Global.
Malone’s Liberty Global has already established a foothold in Europe in its own right and through Discovery. It now controls Britain’s second ranked pay TV business in Virgin Media and with Discovery, bought the independent UK TV producer, All3Media (makers of Midsomer Murders). Liberty also has stakes in 10 other European media companies, including the pay TV/Cable operator UPC, which is in a number of countries from the Netherlands to Slovakia. Discovery has bought Scandinavian broadcaster, SBS, Eurosport and Switchover from Italy. Liberty also owns cable companies in Germany where it’s a competitor to Sky Deutschland.
Malone obtained $US11 billion in assets and cash from Rupert Murdoch eight years ago when he snapped up 16.3% of the then News Corp as Murdoch was shifting its domicile from Australia to the US. Murdoch was forced to buyback those shares in exchange for his company’s shareholding in DirecTV (later sold and now about to snaffled by AT&T for $US48 billion) cash and several smaller cable media assets. Unlike Murdoch, Malone has no heirs and has done deals with the CEOs of Liberty Global and Discovery for them to buy his shares after he dies. That’s a precedent quite a few investors wish Rupert Murdoch would follow at Fox in particular because of the unease they have about the managerial abilities of James Murdoch and his brother (whop is co chairman), Lachlan (don’t mention the Ten Network, OneTel or Super League losses).
