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Cable Technology Feature Article

June 02, 2009

DirecTV CEO Eyes Return to News Corp: Report

By Michael Dinan, TMCnet Editor

As it pursues a strategic merger that would deliver more control to industry mogul John Malone and add a handful of key networks – a deal that’s being challenged in court right now – nation’s largest satellite TV provider reportedly is facing the potential loss of its chief executive to a massive media company.
According to The Associated Press, DirecTV Group Inc. chief Chase Carey is in “serious negotiations” to rejoin News Corp (News - Alert). (he worked there previously as COO) as media icon Rupert Murdoch’s second in command.
Citing anonymous sources, the AP’s Deborah Yao and Ryan Nakashima say the talks have been going on for “a while, but there’s no set title for him yet.”
“This person was not authorized to comment and spoke on condition of anonymity, confirming earlier reports,” the reporters say.
Industry insiders have been speculating for weeks about who will fill in for News Corp. President and Chief Operating Officer Peter Chernin, who is leaving the company at the end of this month to pursue a movie production opportunity at the parent company’s 20th Century Fox.
At the same time, it would leave DirecTV (News - Alert) without an executive head at a critical time.
As TMCnet reported, the company that owns a majority stake in DirecTV is seeking to combine the digital satellite TV service with its own entertainment group and spin both of them off into a new entity.
Officials with Liberty Media Corporation say that merging DirecTV with Liberty Entertainment also will help El Segundo, California-based DirecTV’s shareholders by adding key assets – namely, Game Show Network, FUN Technologies and three regional sports networks.
“We look forward to having the benefit of John Malone’s involvement, as a significant shareholder and as chairman of DirecTV’s board post-merger,” Carey has said.
Specifically, once Liberty Entertainment is spun off from Liberty Media, it will include: 54 percent of DirecTV stock; Liberty Sports Holdings; a 65 percent interest in Game Show Network; Fun Technologies; and about $30 million in cash and $2 billion in debt.
Liberty’s president and chief executive officer, Greg Maffei, said the transaction clarifies DirecTV’s capital structure, reduces its shares outstanding, eliminates stock overhang and arbitrage issues, and provides DIRECTV with strategic content businesses.
“And this transaction offers value to Liberty’s shareholders by eliminating the discount in our tracking stock structure and allowing them to continue to participate directly in the strong performance of DirecTV,” Maffei said.
The deal will give Malone, his wife and associated trusts will hold shares giving them about 24 percent of DirecTV’s total voting power.
At the moment, a pair of pension funds are suing DirecTV and Liberty over the plans.
“The Key West Police and Fire Pension Fund in Florida and City of Roseville Employees’ Retirement System in Michigan filed the lawsuit on Tuesday in the Chancery Court in Delaware,” the AP has reported.
Specifically, the pension funds say DirecTV shareholders are overpaying for assets it will get from the entertainment unit. They also said the deal’s “unreasonable” $450 million breakup fee, plus up to another $10 million in expenses, would deter other potential bidders, according to the suit.
Meanwhile, analysts say the Carey-back-to-News-Corp. deal would be a boon for the media giant. The AP spoke to Barclays Capital analyst Anthony DiClemente, who said the addition of Carey would help the company’s operations run more smoothly and also help with Wall Street.
“I think that if Chase came in, it’d be a huge plus,” DiClemente reportedly said. “You need operational leadership at News Corp. to fill the Chernin void.”

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Michael Dinan is a contributing editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To read more of Michael's articles, please visit his columnist page.

Edited by Michael Dinan