News Corp Fox bid raises questions about Malone

SYDNEY - News Corp's decision to consolidate with a US$5.86 billion ($8.42 billion) bid for the remainder of Fox Entertainment Group has raised questions about a potential deal with John Malone's Liberty Media group.

Rupert Murdoch's global media group has offered to buy the 17.9 per cent of Fox it does not own by offering 1.9 shares of its non-voting stock for each Fox share.

News Corp chief financial officer Dave DeVoe said the media group's board of directors had approved the deal yesterday.

"This is a logical step for our company, particularly since our reincorporation in the United States and inclusion in the S&P500 has reduced the need to have a separate listing for Fox," DeVoe said from the US.

"While we believe that there is much merit in completing this transaction, we also note that we obviously already control and operate Fox through our 82 per cent position and therefore the operational benefits of this transaction are limited.

"[But] it will be a significant milestone in the simplification of our company structure."

The deal had been anticipated by the market since News Corp reincorporated in the US last year.

But some analysts had been expecting Murdoch to resolve a standoff with Malone's US cable group Liberty Media ahead of any move to consolidate Fox.

After Liberty Media took 17 per cent of News Corp late last year, without consulting Murdoch, News Corp set up a poison pill provision to protect the global media group from takeover.

Goldman Sachs JBWere said the lack of obvious financial imperative to do the deal raised questions about why News Corp was buying out the minorities when Fox was trading close to a 12-month high.

"It's also likely to raise the question whether the transaction is being done to coincide with a selective buyback of Liberty Media's non-voting News Corp stake," Goldman Sachs JBWere said in a research note.

News Corp said the Fox transaction was a standalone deal.

"[But] the number of shares being issued by News Corp is spookily similar to the number of shares Liberty owns," Goldman Sachs JBWere said.

"This may be entirely coincidental, but is no doubt going to add to the speculation."

Shaw Stockbroking head of research Scott Marshall said Murdoch needed to resolve the situation with fellow media tycoon Malone.

"News Corp needs to resolve the Liberty situation one way or another," Marshall said.

"I think it could be resolved irrespective of this Fox transaction.

"I think they are things that would happen at around the same time but I don't think that resolving the Fox situation is a necessary precursor to resolving the Liberty situation.

"It may make any dealing easier, but I don't think its a necessary precursor."

News Corp shares fell 23Ac to A$23.74 while its non-voting securities slid 30Ac to A$22.66 after the announcement.

Marshall said the deal was positive for News Corp and the share price drop was likely to be temporary.

- AAP