Partner Claims Right to Buy 50% of Dodgers

Cable mogul John Malone, Rupert Murdoch’s major partner in the sports business, will seek to buy a half-interest in the Dodgers if News Corp. completes the purchase of the Los Angeles baseball team, sources said.

Malone’s sudden emergence, which could be simply a savvy ploy by an astute negotiator, could vastly complicate efforts by Murdoch to get approval for the sale. Baseball owners have been told that News Corp. alone was making the purchase.

News Corp. denied Friday that Malone or his cable programming venture, Liberty Media Corp., had any right to buy part of the team. But a representative of Liberty Media, a 50-50 joint venture partner with News Corp. in Fox / Liberty Sports, said the partnership has an option to share in the deal.

“If either partner acquires some venture in sports, once they have closed the deal, they have to give the [partnership] an opportunity to participate,” said Vivian Carr, vice president of investor relations for Liberty Media.

Based in Engelwood, Colo., Liberty is an arm of the nation’s largest cable company, Tele-Communications Inc., and both companies are controlled by Malone.

Carr said the partnership has not made a decision about whether it will participate, but a source close to the transaction said Malone intends to exercise the Fox / Liberty option once News Corp. completes the proposed $350-million purchase.

News Corp. President Peter Chernin denied plans to share ownership. “This is purely a Fox deal,” he said. “We are partners [with Liberty] in all sorts of sports ventures, but not this. We are under no obligation to offer them ownership.”

Peter O’Malley, the owner of the Dodgers, seemed surprised by the notion that another party might be involved in the purchase and said that as far as he knew Liberty Media was not involved.

“I’m not going to comment on ifs, buts or maybes,” O’Malley said. “Our deal is with Fox. All of those questions should go to Fox.”

Liberty’s contention that it has a right to acquire half of the Dodgers could irritate a committee of baseball owners reviewing Murdoch’s application. A member of baseball’s ruling executive council said: “We’re only approving Fox. Either Fox is buying it or they’re not buying it. This is bizarre.”

Baseball owners also might object to Malone’s financial ties to the Atlanta Braves. Liberty Media has an 8% interest in Time Warner, which owns the Braves. (Malone is a close friend and longtime financier for Ted Turner, who sold the Braves last year and is now the Time Warner vice chairman.)

Bob Graziano, the executive vice president of the Dodgers who has been negotiating the sale, said: “If there was a subsequent transfer, it would have to go through the same process with major league baseball that the Dodgers are currently going through. The transfer couldn’t just be granted by Fox.”

Fox / Liberty Sports is a partnership between the Liberty Media cable programming venture and Murdoch’s News Corp., which owns the Fox broadcast network, Twentieth Century Fox and satellite ventures worldwide. Fox / Liberty Sports owns the fx cable channel and more than a dozen regional sports channels, including Fox Sports West in Los Angeles, and an interest in Madison Square Garden, its sports network and its two professional sports teams.

Sources said, however, that the Fox / Liberty Sports agreement requires each partner to get approval from the other before proceeding on any sports venture. Partnership contracts commonly contain such language to protect joint ventures from being undercut by rivals started independently by the partners.

One source said that Liberty was asked early on to participate in the Dodger purchase but declined. In their sports joint venture, Liberty has been the more conservative partner, criticized by the aggressive Fox for being cautious and slow.

Some observers suggested that Liberty’s claim is primarily a negotiating ploy between two cagey moguls who have made careers out of extracting every advantage. Both men are skilled at using pressure in one venture to get the other to cede ground in another.

Thus, even if the contract language is unclear, it might be in Malone’s interest to put pressure on Murdoch at a delicate point in negotiations with baseball owners. Malone may be seeking a concession from Murdoch in another business area--the two are partners in an array of ventures, including the new Fox News channel, satellite broadcasting company Prime Star, a Latin American satellite company, an Argentine soccer team, as well as Fox / Liberty Sports.

Malone is among the handful of entertainment business moguls who can deal with Murdoch as an equal and the two are in frequent contact. Malone was en route to Maine for a vacation and could not be reached for comment.

“This could be Liberty trying to exert leverage to get something else that it wants from Fox,” said one Wall Street source.

But one analyst said it made sense for Murdoch to bring in Malone to help finance the Dodger purchase.

Murdoch has used 50-50 partnerships to finance many of his ventures, much as Malone helped jump-start News Corp.’s sports business. Saban Entertainment is a partner in Murdoch’s recent $1.9-billion purchase of the International Family Entertainment, which owns the Family Channel.

Fox has managing control of Fox / Liberty Sports and typically runs the ventures owned jointly. So day to day, as far as Dodger fans are concerned, it might not make much difference if Malone had an ownership stake in the team.

But on major decisions, Murdoch and Malone have to find common ground in their joint ventures. If they jointly owned a baseball team, such decisions might include whether to spend $50 million or more for a free agent such as Barry Bonds.

Rumors have persisted over the last year that Murdoch would buy out Liberty Media to move more quickly in his aggressive pursuit of building a regionally based sports business that would compete with the Walt Disney Co.’s ESPN.

But Murdoch’s ability to buy out Liberty is constrained by a squeeze on News Corp.’s balance sheet. The ambitious bidding for regional sports rights over the last year and a series of other billion-dollar purchases by News Corp. have strained the company’s resources.