AOL Deal Puts Malone Back on Shopping Spree

One thing is for certain: John Malone is cashing out up to $1.75 billion of AOL Time Warner AOL stock.

But what Malone will be doing with that money -- and its effect on the future of Comcast CMCSA, Hughes Electronics GMH and Vivendi Universal V, among others -- has Wall Street guessing.

On Thursday evening, the Malone-controlled Liberty Media L announced its intention to raise at least $1.5 billion by issuing 20-year notes exchangeable into AOL Time Warner stock.

Liberty, which holds 4% of AOL Time Warner's shares, thus will be raising money without actually having to sell shares it holds in the battered multimedia conglomerate. Such a deal is an unsurprising maneuver from the relentlessly tax-averse Malone. Now, as Wall Street awaits details of Malone's plans -- he may offer some clues on Liberty's fourth-quarter conference call with analysts, scheduled for next Tuesday -- the speculation about what will happen next covers a whole host of media industry possibilities.

Going Shopping

Although Liberty says the proceeds will be used for the boilerplate "general corporate purposes," the timing of the offer suggests that the entertainment and media company might have a specific venture in mind. After all, with AOL Time Warner shares bouncing around levels last seen in 1998, a patient man like Malone could wait to monetize his stake until he sees an improvement in the media economy, the proposed initial public offering of Time Warner Cable, or a sunnier Wall Street outlook on AOL Time Warner.

Thus, Liberty outsiders are forced to speculate which possible major transaction Liberty might be spending its money on.

Scenario No. 1 has Liberty preparing to purchase the balance of home shopping channel QVC that it doesn't already own from QVC's majority owner, Comcast. Earlier this month, Liberty said it formally initiated a process under which either Comcast or Liberty could end up buying QVC from its partner.