Liberty Media, DirecTV announce spin-off plans

Mon, 05/04/2009 - 8:35am
Mike Robuck

Liberty Media and DirecTV announced today that they have entered into definitive agreements for the combination of DirecTV Group with Liberty Entertainment Inc., a company to be split off from Liberty Media.

The newly formed Liberty Entertainment Inc. (LEI) will have a 54 percent stake in DirecTV Group – the nation’s largest satellite video provider – shares and a 65 percent stake in the Game Show Network. As part of the agreements, DirecTV gains control of Liberty’s Game Show Network and three regional sports channels.

“We are pleased to announce this transaction, as it will rightly put the control of DirecTV in the hands of DirecTV shareholders,” said Chase Carey, president and CEO of DirecTV. “Our existing equity structure was less than ideal. The transaction will improve our ability to pursue strategic initiatives that can enhance value for all DirecTV shareholders. Additionally, in Game Show Network, Fun Technologies and the three regional sports networks, we are acquiring valuable assets that fit in well with the future of the DirecTV business.”

Liberty will hold onto the entertainment unit’s Starz division and will rename it Liberty Starz.

The agreements will reduce cable pioneer and Liberty Chairman John Malone’s voting stake in DirecTV. Malone, his wife and various associated trusts will hold shares that will give them about 24 percent of DirecTV’s total voting power instead of the previous 50 percent.

The steps in the transaction include Liberty Media proceeding with the previously announced split-off of Liberty Entertainment, which will hold the majority of the assets and liabilities currently attributed to the Liberty Entertainment group tracking stock.

LEI will have approximately $30 million in cash, in addition to cash generated by operations after March 31 and $2 billion in debt. DirecTV will provide LEI up to $650 million in funding pursuant to a term loan facility in order to service the LEI debt.

Once the spin-off and merger is completed, each shareholder of LEI’s tracking stock, except for Malone, will get one DirecTV share and will retain 0.1 share of the Liberty entertainment unit that will be renamed Liberty Starz.

The companies said they anticipate that the split-off will occur before the merger, which is projected to be completed in the fourth quarter of this year.

In 2006, Liberty struck a deal with News Corp. to buy its 38.5 percent stake in DirecTV in a transaction that included cash and asset swaps.

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