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To: Dale Baker who wrote (35946)	12/24/2003 6:19:40 AM
From: Dale Baker	Read Replies (1) \| Respond to of 118717

Liberty Media's Next Episode: Malone's Sale of the Company? By MARTIN PEERS and KEN BROWN Staff Reporters of THE WALL STREET JOURNAL The maneuvers of Liberty Media Chairman John Malone have kept Kremlinologists in media circles busy for years. Now, a new guessing game is focused on what could be one of Mr. Malone's most alluring deals yet: the sale of his own company. While Mr. Malone wasn't available to comment, and people close to him play down the idea of a sale, the notion isn't off the wall. He originally built Liberty into a force in the media industry as an affiliate of his cable-TV empire, which he sold to AT&T Corp. for $46 billion in 1999. Without the cable empire, Mr. Malone lost some of the leverage that helped him engineer lucrative deals for Liberty. Hurt by a complex corporate structure, Liberty stock has been stuck in a rut for the past couple of years. As a result, analysts say the company's stock price doesn't reflect the value of Liberty's assets, which include some of the few remaining cable channels not already part of media conglomerates. Not surprisingly, some investors think a sale may be the best way to boost the company's stock price. Perhaps with an eye to an eventual sale, Mr. Malone lately has taken steps to turn around the company by remaking it into more of an operator of businesses and less of a passive investor in other people's businesses. It recently boosted its stake in home shopping channel QVC to nearly 100% for $7.9 billion and negotiated to take control of international cable-TV concern UnitedGlobalCom. So far, the new strategy doesn't seem to have been noticed by most investors. Liberty's stock jumped from a low of $8.45 a year ago to a high of $12.27 in July, when the QVC acquisition was announced, but it quickly fell back to between $10 and $11. Tuesday, Liberty shares were up four cents at $11.39 as of 4 p.m. trading on the New York Stock Exchange, well short of the $15-a-share value that most analysts put on the stock. Adding to the speculation about a possible deal, a host of Wall Street analysts, including Lehman Brothers, Merrill Lynch and Sanford C. Bernstein, last week published research reports arguing the stock is undervalued. "Are the current moves to . . . turn the company into an operating business just part of the preparation process to ready Liberty for sale over the next five years?" asks Sanford analyst Tom Wolzien in one of a five-part series on Liberty published last week. Taking advantage of the stock's weakness, Mr. Malone and Capital Research & Management, home to Mr. Malone's longtime ally Gordon Crawford, both have been buying. Mr. Malone has bought more than 660,000 of Liberty's B class supervoting shares over the past couple of weeks, paying up to $12.30 as recently as last Friday, he has disclosed in Securities and Exchange Commission filings. The purchases of the thinly-traded B shares have increased Mr. Malone's total stake to about 126 million shares, about 4% of shares outstanding but 23% of the voting stock. His voting stake could rise as high as 28% if Liberty finalizes discussions under way to buy back 96 million supervoting shares owned by the family of the late Bob Magness, who founded Liberty's original parent company. "He is doing the things that are starting to get the street excited, which is a good thing," says Scott Benesch, a media analyst at U.S. Trust. "The question is how do you get the stock from 11 to 12." Liberty's attraction is largely its ownership of valuable cable channels. It owns about 50% of Discovery Communications, parent of hugely profitable Discovery Channel, and an array of other channels. Mr. Wolzien says News Corp. would be an obvious buyer for Liberty, although a person close to News Corp. downplayed its interest. A sale has some formidable obstacles. Liberty has a market value of roughly $32 billion, which, along with debt, means that a purchaser would have to slap down at least $40 billion to buy the company. Liberty also is a hodgepodge of businesses. These include big interests in cable systems in Japan, Chile and parts of Europe as well as the pieces of U.S. cable networks, and investments in public companies, such as News Corp. Aside from QVC and movie-channel concern Starz Encore, its fully owned businesses include the On Command hotel movie service. Most buyers would likely want some, but not all those assets. To deal with that, Mr. Malone could break Liberty up into more digestible pieces. The company is taking steps to divide into three areas: international cable, U.S. programming businesses such as Discovery, and interactive operations such as QVC. Liberty Chief Executive Robert Bennett told analysts on a conference call last month that "from a management point of view" and possibly a financial reporting perspective, the company was increasingly looking at its businesses along these three lines. A Liberty spokesman said the company was "always considering new ways to highlight and increase value," but he declined to comment on a possible breakup. Liberty has talked off and on over the past couple of years about splitting off its international operations as a separate company, although it lately has taken that option off the table. Such a move would focus attention on the value in those operations and provide a stock that could be used for acquisitions. Write to Martin Peers at martin.peers@wsj.com and Ken Brown at ken.brown@wsj.com