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Liberty Spreads News on DirecTV

1/12/2003 7:00 PM Eastern

Liberty Media Corp. is in talks with News Corp. concerning a possible joint acquisition of DirecTV Inc., the direct-broadcast satellite arm of Hughes Electronics Corp., Liberty CEO Dob Bennett told investors and analysts last week.

Bennett, who spoke at the Salomon Smith Barney Inc. Global Entertainment, Media and Telecommunications Conference in Palm Springs, Calif., last Tuesday, made that revelation as part of his presentation, which outlined four initiatives to build Liberty's distribution footprint.

The three other planks: Expanding Liberty's European cable footprint through its ownership in United Pan-European Communications N.V.; possibly acquiring the Vivendi Universal Entertainment division of Vivendi Universal S.A.; and exercising its February put option for its stake in home-shopping channel QVC Inc.

At the conference, Bennett offered little insight into any progress made on any of those fronts. But he did say that Liberty has been in conversations with News Corp. and DirecTV parent Hughes about a possible acquisition of the No. 1 DBS platform. He said it was too early in the process to say what ultimately might happen.

"We are in conversations with News Corp. to create a partnership," Bennett said at the conference. "Given our historic relationship with them, I'm reasonably optimistic we will be able to work that out."

Liberty also has had conversations with Hughes parent General Motors Corp, Bennett said.

Earlier in the week, GM CEO Rick Wagoner told the Associated Press that any plans for Hughes would be announced in the next 60 days.

Eyes on VUE

On the Vivendi front, Bennett confirmed speculation that Liberty would be interested in buying the VUE unit, which includes the USA Network and Sci Fi Channel cable services, Universal Studios and Universal Music.

"We don't know what [Vivendi] management will elect to do," Bennett said. "We have discussed an interest in acquiring either all or a large stake in that business. The combination of the studio and the networks is a natural fit with [Liberty's premium programmer] Starz [Encore Group LLC]."

Last year, several published reports claimed that Liberty was trying to engineer a deal in which it would spin off Starz and combine it with VUE. Vivendi has been selling off assets to pay down its heavy debt, but the French conglomerate has not announced its intentions for the VUE unit.

Liberty also had been rumored to be working on a VUE deal with its chairman, Barry Diller. According to reports, Diller — who also is chairman of USA Interactive Inc. — would run the combined operations.

Diller, who spoke at the Salomon conference on Wednesday, didn't talk about a possible alliance with Liberty, praising Vivendi management for its debt-reduction moves.

He said Vivendi has three options: keeping the assets, dismantling the USA partnership and creating a new one that would give USA a participation in the business or selling it to a third party.

Already a third party has made a bid — oil billionaire Marvin Davis. However, Davis's $20 billion bid was rejected by Vivendi last year as too low.

Diller and Davis have a history, albeit a strained one. Davis hired Diller away from Paramount Pictures Corp. in 1984 to run 20th Century-Fox Film Corp., but the two soon butted heads. Davis sold the studio to News Corp. in 1985.

Diller scoffed at the possibility that Davis would end up with VUE, calling a Davis acquisition "a sad day for the world."

He added, in an obvious reference to the wait staff at the conference, "Since that has as much chance as anybody who's serving you today, I'll kind of remain confident."

No QVC decision yet

Regarding QVC, Liberty has a put option that takes effect in February, through which the company could either buy out Comcast Corp.'s interest in the network or force the Philadelphia-based MSO to buy its 42 percent interest. Liberty hasn't yet decided what to do, said Bennett.

While Liberty had tried to expand its European cable footprint by attempting to make big acquisitions in the Netherlands and Germany — only to have them squashed by regulators — Bennett said that UPC's subscriber base is sufficient for the time being. UPC is the largest cable operator in Europe, with 7.2 million subscribers.

 

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