Cable Operators

Malone Doles Out Voting Rights

Cable Legend Pledges Voting Shares in Liberty Global, Discovery to Top Execs 2/18/2014 9:42 PM Eastern

Cable legend John Malone is apparently setting the stage for his future exit from the industry, agreeing to allow two top executives at two of his biggest holdings – Liberty Global and Discovery Communications – the right to acquire his shares in both media giants, according to separate Securities and Exchange Commission filings Tuesday.

In a letter to Discovery Communications CEO David Zaslav dated Feb. 13 and filed with the SEC, Malone wrote that in recognition of his “successful tenure with Discovery and in expectation of the continuance of that relationship under your new employment agreement,” Zaslav would receive the right to vote Malone’s shares in the event Malone himself did not vote them. Malone, who owns about 29.5% of Discovery’s vote, is one of the company’s biggest shareholders. Zaslav also receives the right of first refusal in the event Malone decided to sell his shares. If Malone and Zaslav could not agree on a price, the Discovery CEO would have the opportunity to match any offer from a third party. These rights only last as long as Zaslav is CEO of Discovery and a director. In January, Zaslav signed an employment contract that will keep him at the helm of the programmer through 2019.

Malone, 72, gave similar rights to Liberty Global CEO Mike Fries. Malone owns about 27% of Liberty Global’s voting shares.

Malone is chairman of Liberty Global and is a director of Discovery Communications. He did not make a similar filing for his largest holding, Liberty Media, of which he is also chairman.  

According to reports, Malone said that he has no intention of selling shares and has no plans to step back from either Discovery or Liberty Global, but in the event he does decide to sell, is pleased he has two strong managers to steer the companies forward.

“I am thrilled about these agreements with Mike Fries and David Zaslav, two CEO's that I have worked with for a very long time and in whom I have the utmost confidence and trust,” Malone said in a statement. “Nothing is changing right now. I have no plans to transfer any of my voting shares and plan on staying actively involved in both Liberty Global and Discovery Communications going forward. But, in the event I do in the future decide to pursue the sale of my voting position, I am excited about providing these two strong executives, who have both created significant shareholder value, with a path toward acquiring that stake and preserving the long-term stability and continuity of the companies they have built and will continue leading into the future.”

Zaslav, who joined Discovery in 2007 from NBC, has been instrumental in the programmer’s growth over the past seven years. During his watch, Discovery’s stock price has increased more than five-fold from $13.81 each in 2008 to $80.33 each on Tuesday, he has forged high-profile partnerships with Oprah Winfrey and significantly expanded the company’s international reach. Zaslav signed a new six-year employment deal in January that could net him about $100 million in 2014, according to published reports, including an annual base salary of $3 million, $6.6 million in potential bonuses and 1 million shares of restricted stock worth about $80 million at today’s prices.

Fries has had a similarly successful run a Liberty Global, growing the international cable giant from about 12.8 million customers when he was named CEO in 2005 to more than 24 million subscribers in 14 countries today. During Fries tenure, Liberty Global shares have more than tripled from $23.62 per share in 2005 to $87.51 each on Feb. 18.

 

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