* News Corp to buy 9.09 pct in Rotana new shares
* News Corp has option to double stake for $70 mln
* Deal amid intense competition, deep changes in Arab media (Recasts with details, quotes and background)
By Souhail Karam
RIYADH, Feb 23 (Reuters) - Saudi-based media group Rotana will sell shares to News Corp (NWSA.O) for access to the U.S. firm’s movie-making and new media expertise to help boost its position in Arab media ahead of an IPO.
Rotana owns the Arab world’s largest record label and about 40 percent of the region’s movies — most of which are Egyptian — and operates 11 free-to-air television channels, two of which are through a partnership with News Corp.
Rotana will get $70 million for 9.09 percent of its capital in new shares that will be issued for the long-anticipated deal and News Corp will have 18 months after the completion of the deal to double its stake to 18.2 percent for another $70 million, Rotana Chairman Prince Alwaleed bin Talal said on Tuesday.
“This (News Corp) transaction values Rotana at more than 3 billion riyals ($800 million) ... But the transaction is way, way beyond finance ... Rotana does not need to be financed. It has near-zero debt,” he told reporters.
Prince Alwaleed, who through his Kingdom Holding Co (4280.SE) investment vehicle holds a stake of about 7 percent in News Corp, said Rotana would appoint an adviser within two to three months to help it restructure internally and select a stock exchange for its listing. He gave no further details.
He said Rotana would benefit from News Corp’s experience in television, movie production and new media, such as MySpace.
“This is a qualitative leap not just for Rotana but for the whole Arab world,” he said.
News Corp Chairman James Murdoch said the deal expands News Corp’s presence in a region with “a young and growing population where GDP (gross domestic product) growth is set to outstrip that of more developed economies in the years ahead”.
“Rotana is a leading player in the Middle East and we look forward to working together,” Murdoch said in a statement.
The deal with News Corp will help to boost Rotana’s position in a scattered Arab media landscape that is rapidly changing.
Rotana’s biggest rivals are with Saudi-based privately-owned Middle East Broadcasting Center (MBC) and two pay-television networks — Arab Radio Television (ART), also Saudi-based, and Orbit Showtime Network (OSN) in Dubai, which is the result of a merger in August.
Over the past three years, MBC has launched several channels dedicated to news and Western movies and has secured the rights to broadcast popular western shows such as Fox’s American Idol.
Rotana has responded by launching Fox Movies and Fox Series to broadcast American movies and television shows.
The Rotana-News Corp deal has sparked speculation that Fox News will launch an Arabic version to compete with news broadcaster rivals Al Jazeera and MBC’s Alarabiya.
Prince Alwaleed said this was unlikely.
“I don’t visualise a situation whereby Fox News would be broadcasting in Arabic,” he said.
However, he said the partnership would help Fox News and the United States to “understand the Arab world better”.
“Fox News is not the only media that is against Saudi Arabia ... It’s an American syndrome”. (Writing by Souhail Karam; editing by Karen Foster