Media moghul Rupert Murdoch-owned News Corp has announced plans to privatise its pay TV encryption technology company, NDS Group. Private equity company Permira Advisers stands to gain a $1.77 billion windfall from the deal.

NDS is a UK-based subsidiary which supplies encryption technology and smart cards to News Corp's pay television investments, which include Foxtel, Australia; BSkyB in the UK; and Sky Italia. The encryption and smart cards ensure programs on the pay TV network can be viewed only by paying subscribers.

According to a News corp statement, the two companies will offer NDS's outside investors $60 per share. They will reduce News Corp's stake from the present 72 per cent to 49 per cent, and Permira will acquire a 51 per cent controlling stake. The deal reflects a 20.7 per cent premium to NDS's american depositary shares weekend closing price on Nasdaq of $49.70.

Permira will pay $60 per share for News Corp's series B shares, $1.5 billion in cash along with a $200 million vendor note. Financing for the deal is reported to be in place, with debt being provided by JP Morgan, and Morgan Stanley.

The statement also said that the buyout is an excellent opportunity to exit an ''illiquid investment at an attractive price'' in a very challenged financing and economic market environment. The $3.6 billion buyout is expected to be completed later in the year, subject to court and shareholder approvals.

A couple of weeks ago a jury in California had held that NDS violated federal and state piracy laws, though without malice. That ruling brought to an end five years of war with rivals over allegations that NDS leaked trade secrets of competitors to hackers to further its own business interests.

Media reports suggest that the jury ruled NDS to bear the estimated $100 million in legal costs for the case while dismissing damage claims of over $1 billion.

Pay TV piracy claims became big news in February with Germany's largest pay TV service provider Premiere reporting missed sales targets on account of hackers cracking its subscription wall and modifying digital set-top boxes to allow viewers illegal access to its programs.

Premiere's security system came from Kudelski, NDS's Swiss rival that owns half of NagraStar, one of the plaintiffs in the espionage court battle.

Later in April, Premiere announced that it would introduce NDS encryption technology, in addition to a new smart card system from Kudelski. Since the beginning of the year, News Corp has built a 25 per cent stake in Premiere, kicking off rumours that it could bid for the company to expand its global pay TV network.