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Murdoch and Malone swap assets, end feud

NEW YORK -- Three days before Christmas, two of the most powerful men in the media business, Rupert Murdoch and John Malone, exchanged assets, formally ended a long-running feud.

Under a deal made public yesterday, Malone's Liberty Media Corp. will give its 16.3 percent stake in Murdoch's company back to News Corp., putting an end to what Murdoch had seen as a potential threat to the control of his globe-spanning media empire.

In exchange, Liberty will get a controlling stake in major satellite TV broadcaster DirecTV Group Inc. and three regional sports networks and $550 million cash.

Malone, Liberty's chairman, had surprised Murdoch two years ago by suddenly amassing a stake in News Corp. Murdoch responded by adopting a "poison pill" antitakeover tactic that was met with protests from shareholders.

Talks between the two companies have dragged on, and both were frequently peppered with questions over how the situation would be resolved. Two weeks ago, a tentative agreement was struck.

Liberty's shares rose $4.23, or 4.52 percent, to close at $97.87 on the Nasdaq Stock Market. News Corp.'s slipped 5 cents to end at $21.53 on the New York Stock Exchange, while DirecTV's fell 45 cents to $24.55.

In addition to eliminating a potential threat to Murdoch's control over News Corp., that company also benefits by effecting a stock buyback equivalent to $11 billion by taking in the shares owned by Malone, without having to buy them back with cash.

Since the deal is structured as a swap of assets, A.G. Edwards analyst Michael Kupinski said in a note to investors that the deal, in addition to giving Liberty increased distribution clout, was also worth $15 per share in tax benefits alone.

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