News Corp.'s Carey Emerges as Leader on BSkyB, Company's Biggest Deal

News Corp. Chief Operating Officer Chase Carey, brought in as Rupert Murdoch’s No. 2 less than a year ago, has emerged to lead negotiations on the biggest acquisition in the company’s history.

Carey is pursuing a deal Murdoch has desired for years, as News Corp. bids for the 61 percent of British Sky Broadcasting Plc it doesn’t own. After making his mark as CEO of DirecTV Group Inc., Carey is trying to win over directors of BSkyB. The U.K.’s largest pay-TV provider, BSkyB says the 7.8 billion-pound ($11.5 billion) bid needs to be raised at least 14 percent.

“Rupert has a lot of confidence in Chase,” said Alan Gould, an analyst at Soleil Securities who owns some News Corp. shares. “This is exactly what he brought Chase in to do.”

For Murdoch, who has held a stake in BSkyB for more than two decades, taking full control of BSkyB would help reap the rewards of a faster-growing investment. News Corp. sales rose 28 percent in the five years through June 2009, according to data compiled by Bloomberg. BSkyB had revenue growth of 39 percent.

The value of News Corp.’s investment has more than doubled since the London-based company’s initial public offering on Dec. 8, 1994. The U.K. company’s shares have also outperformed those of News Corp., which dropped by about a fifth in the last five years. In contrast, BSkyB shares rose 18 percent, not including the 17 percent gain after News Corp.’s offer.

Carey, 56, who’s sported a handlebar moustache since playing rugby at Colgate University, has called the current bid “full and fair.”

DirecTV Experience

“He’s very good at isolating what the key issues are quickly,” said Derek Chang, DirecTV’s executive vice president of content strategy and development, who worked for Carey for three years. In negotiations, “he would try to line things up in a way to best take advantage,” Chang said.

Carey previously spent 14 years at News Corp., ending as co-COO in January 2002. Murdoch, News Corp.’s 79-year-old chairman and CEO, bought a controlling stake in late 2003 in Hughes Electronics Corp., later renamed DirecTV Group Inc., and installed Carey as CEO.

There he invested in high-definition TV, switching two satellites to HD capacity instead of providing Internet service. The move gave the El Segundo, California-based company, the largest U.S. satellite-TV distributor, a jump on competitors with HD channels that helped attract 6 million additional U.S. subscribers, bringing the total to more than 18 million, and boost the share price about 50 percent during his tenure.

“When he ran DirecTV, it was probably the best managed satellite operator in the world at that time,” Gould said.

Rejoining News Corp.

News Corp. sold its stake in DirecTV to Liberty Media Corp. in 2008. Carey rejoined News Corp. as COO in July 2009 after Peter Chernin departed. Carey was in London and unavailable for comment, Teri Everett, a spokeswoman for News Corp., said today.

It was Carey and Chief Financial Officer David DeVoe who took questions from analysts on a call yesterday, not Murdoch, who led News Corp.’s purchases of Dow Jones & Co. and MySpace. One analyst asked about the boss’ absence.

“You can be assured Rupert was actively involved,” Carey responded, without elaborating.

James Murdoch, Rupert Murdoch’s 37-year-old son, won’t participate in the talks because he is both BSkyB’s non- executive chairman and the head of News Corp.’s operations in Europe and Asia.

BSkyB’s independent directors said they may accept an offer of more than 800 pence a share, higher than the 700 pence a share News Corp. offered. BSkyB, formed in 1990, has about 9.77 million subscribers, drawn in part by the company’s exclusive live rights to popular events such as Premier League, England’s top soccer league.

Odds of Success

“Distribution assets are Carey’s sweet spot,” said Fitch Ratings analyst Mike Simonton. “He and James Murdoch are likely to play an important role in News Corp.’s potential expansion of distribution assets globally.”

There’s a 75 percent chance Carey will reach a deal with BSkyB if regulators approve the combination, Julien Roch, an analyst with Barclays Capital, wrote in a research report today, though timing and price are still up in the air.

Carey’s moustache may be the best-known aspect of a man who’s kept his private life private. He lives in Connecticut and keeps details about his wife and children close to the vest at work. Executives who worked with him for years said they aren’t sure how many kids he has. He’s known as an avid fan of the New York Yankees baseball team and football’s New York Giants.

“For being the media mogul that he is, he’s an extremely down to earth guy,” DirecTV’s Chang said. “He’s not flashy. He’s not trying to be out in front of Hollywood.”

Harvard MBA

Carey, who’s based at News Corp.’s New York headquarters, is there about half the time. The balance he spends in Los Angeles and at the company’s European and Asian operations.

Carey received his bachelor’s degree in math and economics from Colgate in 1976 and went onto to earn his MBA from Harvard University in 1981.

In December, News Corp. raised its stake in Sky Deutschland AG, Germany’s biggest pay-TV service, to more than 45 percent. Carey joined the board of Sky Deutschland in April.

News Corp. and BSkyB have agreed to seek regulatory approval together, which could take six months or more, as they hash out a price. The deal may boost earnings by 17 percent to $1.33 a share in fiscal 2011, according to RBC Capital Markets analyst David Bank.

Carey’s disciplined approach has assuaged News Corp. shareholders, who may have otherwise been hoping for a share buyback, now on hold until debt is reduced following the deal, Bank said in an interview. News Corp. said it will raise about $4 billion in debt and won’t issue stock to fund the purchase.

Investor Reaction

“They said they made a full and fair offer, which was a positive, and it doesn’t sound like they are going to necessarily reach to acquire it,” Bank said. “The fact that the offer is nonbinding leaves them with the chance to get out of it if they want.”

News Corp. rose 9.5 percent yesterday, the most in 15 months, in Nasdaq Stock Market trading. BSkyB shares jumped 17 percent yesterday, the biggest gain in more than 10 years.

News Corp., also the owner of the Wall Street Journal, fell 21 cents to $14.16 at 4 p.m. New York time today. BSkyB added a penny to 701 pence.

BSkyB is a business model Carey knows well. As co-COO of News Corp., he helped the company expand its television business internationally, acquire sports rights and oversaw worldwide satellite operations. At DirecTV, he negotiated exclusive sports programming deals, including with the National Football League.

“It’s no surprise that he’s looking to increase the business exposure they have to the business he knows best,” said Richard Greenfield, an analyst with BTIG LLC. “All deals flow from Rupert, but I think from an operating standing point, Chase has done a great job even in the relatively short period he’s been back.”

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

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