News Corp. stocking up

Fox pays debt as bank buys 50 million shares

By JILL GOLDSMITH

NEW YORK -- News Corp. raised $1.3 billion Tuesday through a secondary stock offering of subsid Fox Entertainment, lining its coffers for potential acquisitions, including another play for DirecTV.

Some 50 million shares were sold to investment bank Goldman Sachs, the underwriter of the offering, at $24.75. The cash goes to Fox, which will use it to repay debt it owes News Corp. After fees, News Corp. will net about $1.2 billion. The new shares dilute News Corp.'s stake in Fox from 85% to slightly more than 80%.

Fox shares closed Tuesday off 22¢ at $26.61.

News Corp. boasts one of the healthiest balance sheets in showbiz and posted stellar quarterly results last week. It now has about $3.3 billion in cash on hand. The offering gives it additional financial flexibility. The timing sends a strong signal that Rupert Murdoch's conglom is preparing a new bid for GM's Hughes Electronics, which owns satcaster DirecTV.

The FCC and Justice Dept. have nixed a merger deal between EchoStar and Hughes. The partners said they will appeal the DOJ decision in court. But it seems increasingly likely they might have to scrap the merger, which would have created a satellite behemoth. If so, GM would be free to start negotiating with News Corp. in late January.

Murdoch, who controls BskyB, Sky Italia and Star TV in Asia, would dearly like DirecTV to provide a core U.S. component to his satellite empire. He and other News Corp. execs have said publicly in recent weeks that any new offer would be structured differently from the proposal GM and Hughes rejected a year ago. Hughes stock has fallen in value since then. And News Corp. is said to be interested in buying only GM's controlling stake in Hughes, if possible, not the whole company. That could cost $4-$5 billion.

Fox filed a so-called shelf registration with the SEC in June to raise up to $2.5 billion. That puts the commission, and investors, on notice that a company might sell shares and speeds up the process if and when it decides to go forward. However, News Corp. doesn't plan to issue any more Fox shares since that would dilute its stake below the 80% threshold it needs to consolidate Fox on its balance sheet.