What Does John Malone Want?

Watching John Malone make big financial moves is fun. Watching the pundits pontificate about what he’s really up to is more fun.

The Liberty Media chairman’s recent moves toward Rupert Murdoch’s News Corp. haven’t disappointed. In a deft use of financial derivatives, Malone is about to boost his share of News Corp.’s voting stock from 9% to 17%, panicking the Murdoch family.

News Corp. Chairman Rupert Murdoch thought his 39% share of the family company’s shareholder votes gave him a lock on control. Now he’s scrambling to enact standard takeover defenses that most big companies adopted during the ’80s’ go-go days of hostile takeovers.

Last Tuesday, Murdoch said he would ask Liberty for a standstill agreement, essentially hoping that Malone will stop while News Corp. decides how to cope with him.

Malone, of course, won’t fully explain what he’s up to. Take your pick of motives from analysts and the press:

  1. Malone wants to swap assets with News Corp.
  2. He wants to sell Starz (worth around $3 billion).
  3. He wants to buy National Geographic Channel ($500 million).
  4. He wants to sell Liberty’s 50% stake in Discovery Communications ($6 billion).
  5. He wants to unload QVC ($15 billion).
  6. He wants to sell his 19% stake in InterActive Corp. ($3 billion).
  7. And my personal favorite: Malone wants to take over News Corp. That would cost a mere $70 billion.

Since the speculators have most theories covered, one of them is bound to come true. But here’s one big blind spot many of these forecasters have: betting on Malone as a corporate conqueror who’s always on a takeover spree, the Darth Vader, the evil genius of media.

Kids, those days are over. Malone, 63, is tired. He’s in a slowdown mode, more interested in retirement than in expansion.

Unlike Malone, Rupert seems to want to conquer business after business until they pry his cold dead hands from his desk. Now 72, he has remarried and had two children in the past three years. With three of his adult children in the family business, Murdoch is concerned about his legacy.

Malone, in contrast, prefers to drive an RV cross-country from the Rockies to vacation in Maine each year. His two kids aren’t in the business. And he likes to be alone.

So look at Malone’s moves through that prism. Forget any idea of a big takeover attempt or even a major purchase of News Corp. assets. Look instead to major sales of Liberty divisions or the whole company itself.

For a hint, look at Liberty’s recent spinoff of its foreign cable systems and networks, creating Liberty International. One goal was to make Liberty more appealing to stock traders turned off by heavy investment in Argentine and Japanese cable systems. But more important, it also makes Liberty easier to break up or sell whole.

The speculation over Malone is reminiscent of the days after Ted Turner sold his company to Time Warner. For months, Wall Street and the press openly speculated that Ted wanted to push out Time Warner CEO Jerry Levin and take charge of the company.

What outsiders never understood was that Ted didn’t want to work that hard. He hadn’t even really run his own company for years. Board members had long groused that Ted averaged three days or so a month at TBS, spending the rest of his time on his vast Montana ranch or traveling. Ted wanted authority over big decisions and the glory of being a player. But he didn’t want to run anything bigger than a chain of buffalo restaurants. (I hear the burgers at Ted’s Montana Grill are quite tasty.)

Malone’s days as a capricious media baron are dwindling. When he controlled Tele-Communications Inc. (TCI), then the country’s largest cable operator, Malone was the gatekeeper for programmers, allowing him to dictate who won and who lost. But once he sold TCI to AT&T in 1999, he lost that leverage. Despite Malone’s financial-engineering brilliance, Liberty was hurt by the same dotcom and telecommunications troubles that hit far more pedestrian corporations.

What Malone does have are assets that he’s betting Murdoch wants. Liberty’s pay movie network Starz would nest well with movie studio 20th Century Fox. Unfortunately, Starz is also Liberty’s weakest operation.

Discovery Networks’ surging cash flow is attractive, as are a host of young, overseas networks that would mesh with News Corp.’s worldwide operations.

Liberty’s most appealing asset is 17% of News Corp. itself, an $8.2 billion kitty accumulated by swapping assets like sports networks, The Family Channel and part of TV Guide Gemstar to Murdoch over the years. Those shares account for around 20% of Liberty’s total assets.

Malone’s not quite as far gone as Ted. He still loves gamesmanship and certainly has lots of chess pieces to play with overseas, which is where he’s focusing more of his energy. He certainly has the full attention of Murdoch, who recently enacted a poison-pill takeover defense, then called on Saudi Arabia’s Prince Alwaleed bin Talal, a major shareholder for support.

Clarity is coming soon, since Malone’s new and improved voting power in News Corp. expires in six months as stipulated in the unusual deal.

One thing is certain: Doctor John will find some entirely new deal to get us guessing again.