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Stock Analyst Update

Everyone's a Winner in News Corporation Deal

Agreement with Liberty Media is good news for all parties.

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What Happened?
News Corporation (NWS) has agreed to acquire Liberty Media's (LMG.A) 21% stake in Gemstar-TV Guide International (GMST). Under the terms of the complicated agreement, announced Wednesday, Liberty will swap 80% of its interest in Gemstar in return for limited-voting-rights News Corp. shares and the other 20% for Sky Global Networks shares, the global pay-TV subsidiary of News Corp. Liberty will become the largest nonvoting shareholder in News Corp. with an 18% stake and News Corp. will become the largest shareholder of Gemstar with a 43% stake.

What It Means for Investors
We think this is a coup for News Corp. investors. Gaining a larger interest in Gemstar could help News Corp. win the battle for highly coveted Hughes Electronics (GMH) and its DirecTV subsidiary by making News Corp. shares even more attractive to General Motors (GM), Hughes' parent. Gemstar's technology and Hughes' direct satellite broadcast system would become the powerhouse of interactive TV. Even without Hughes, Gemstar is a great strategic fit for News Corp. and its satellite networks around the world.

Richard Wilson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.