Liberty Media snaps up slice of News

AMERICAN entertainment group Liberty Media has exercised a right to buy $500m (£300.5m) of preferred stock in Rupert Murdoch's News Corporation as the media giant upgraded its profit forecast on the back of stronger-tha-nexpected performances at BSkyB and Fox TV.

Liberty will buy the limited voting American Depositary Receipts at $21.50 each, compared with yesterday's closing price of $27.29. News said it expected the deal to be completed within a fortnight.

The deal gives Liberty another 23.3m ADRs, each of which represents four preferred limited voting ordinary shares, or 93m shares in total, taking Liberty's interest in News to almost 20%.

Non-voting preference shares are Murdoch's preferred means of raising capital. While he controls 31% of the voting stock, his financial interest is less than 20%.

Liberty acquired the right to buy the ADRs in March this year, under an agreement requiring the company to exercise the option by the end of September.

The deal effectively ruled Liberty out of the running for satellite-company DirecTV, which News hopes to acquire by the end of the year. It is still awaiting regulatory approval.

If Liberty had not exercised its right, News could have ordered Liberty to purchase $500m of the preferred scrip if News acquired an ownership interest in Hughes - DirecTV's parent.

Meanwhile, News Corporation's president and chief operating officer Peter Chernin told a Goldman Sachs conference in New York that he expected profit to increase by between 8% and 12% in the coming year.

'Our current trends look pretty good,' Chernin said in a session broadcast over the internet. 'All of our sectors are firing exactly as we expected them to be.'

News's Fox television network said in May that it sold more than $1.6bn of ad slots in advance of the current television season. Chernin is also expecting a big dividend from the US Presidential election and the Olympic Games next year.

But the advertising market is not without problems. News, in common with other broadcasters, is concerned that use of video recorders is weakening the value of TV ads, as consumers delete ads or fast-forward past them, and is experimenting with other formulae, such as showing ads before and after TV shows.

'I think what's going to be challenged is that 30-second commercial,' Chernin said. Chernin's bullish projections were supported in a separate note to clients by Merrill Lynch, which also expected News to provide strong growth at BSkyB and Italy's Sky Italia.