Mogul aims to simplify business by acquisition

Few media executives have ever described John Malone as a mogul in search of a simple business.

The veteran cable entrepreneur, chairman of Liberty Media and its overseas namesake, Liberty Media International, is described variously as a "consummate financial engineer" and the only industrialist to get the better of Rupert Murdoch.

One insider describes the relationship between the men as "three-dimensional chess played by equally matched players of comparable power".

Last autumn, the chess game gained a new dimension when Mr Malone surprised News Corp by increasing his voting stake in the Murdoch empire to 18 per cent, prompting the US media group to introduce a poison pill aimed at preventing Liberty from gaining creeping control.

But Mr Malone - charming in person, calculating from a distance - says he is motivated by a desire to simplify his company.

He cites simplification as the driver for both the News Corp move and this week's unrelated $3.5 billion buyout offer by Liberty Media International for outright control of UnitedGlobalCom (UGC), its European cable affiliate, which owns cable operator Chorus.

"Some of the issues are exactly the same. The thing is that UGC and Liberty Media International are by their nature operating businesses that have a clear strategic direction. But when you're trying to explain what Liberty Media is [ in the US], that explanation is not simple. It's not just about generating shareholder value over time, but finding a structure where what the company stands for is One mooted solution would be for Liberty to exchange its News Corp voting stock for cash and shares in a new operating vehicle, combining some of the Murdoch empire's channel assets and Liberty's operating businesses, such as Starz Encore, the entertainment network, and its near-50 per cent stake in Discovery.

A tax-efficient separation of the company could also help eliminate Liberty's mutual fund discount, linked to its non-core shareholdings in companies such as Time Warner, Viacom and InterActiveCorp.

Mr Malone named News Corp's partly-owned National Geographic channel as one asset he would like to get his hands on. Without disclosing the likely timetable for a deal, he says completion of this week's transaction, expected in the second quarter, would allow the company to "spend more time issue>meantime>>>powerhouse for organic growth and bolt-on acquisitions in Europe, Japan and Latin America.

Under the cash and shares deal, investors holding the 47 per cent of UGC not already owned by Liberty Media International will be offered stock equivalent to 30 per cent of the new global company or $9.85 a share in cash.

The enlarged group, which will have $3.6 billion in cash, could look at two or three large transactions in western Europe and channel expansion in Japan.

buy>>initial public Japanese joint venture with Sumitomo and Microsoft that is the country's leading cable operator.

Mr Malone is coy about the possible flotation.

>from various partners to ensure there is liquidity and to provide a currency place.>He regards growth opportunities in Japan and mainland Europe as more attractive than in Britain, where cable operators NTL and Telewest have emerged from restructuring after years of tough competition against British Sky Broadcasting in pay-TV and BT Group in telecoms.

He says the logic for an NTL-Telewest merger is compelling, but he is >"Local telecom operators can spend large amounts of capital on challenging them. Look at Verizon in the US laying fibre to the home.

"If BT were to do the same, and given cable has no leverage on video because of the strength of Sky, you'd be more nervous about the UK than the markets operates."

Instead, Liberty Global will look towards organic growth in data, video and telephony in Europe, new services such as voice-over-internet, accretive bolt-on acquisitions, and stock buybacks.

"We are happy to maintain our discipline in that area and concentrate on organic growth through attracting subscribers," he says.

"If you look at the three regions where Liberty Global would operate, between UGC broadband and Latin America and J-Com, you have the best cable MSOs [multiple system operations] in those markets.  It's a best-in-class operation."