DirecTV and John Malone's Liberty Media announced Monday that they have entered into definitive agreements to combine DirecTV Group with Liberty Entertainment, a company to be split off from Liberty Media.
"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."
Greg Maffei, president and CEO of Liberty, said: "This transaction clarifies DirecTV's capital structure, reduces its shares outstanding, eliminates stock overhang and arbitrage issues, and provides DirecTV with strategic content businesses. And this transaction offers value to Liberty's shareholders by eliminating the discount in our tracking stock structure and allowing them to continue to participate directly in the strong performance of DirecTV."
The steps in the transaction include Liberty Media proceeding with the previously announced split-off of Liberty Entertainment Inc. (LEI), which will hold the majority of the assets and liabilities currently attributed to the Liberty Entertainment group tracking stock.
According to the companies, LEI will now be comprised of: (1) approximately 54% of the common stock of DirecTV; (2) Liberty Sports Holdings, which owns three regional sports networks: Fox Sports Northwest, Fox Sports Rocky Mountain and Fox Sports Pittsburgh; (3) a 65% interest in Game Show Network and FUN Technologies; (4) approximately $30 million in cash in addition to cash generated by operations after March 31; and (5) $2 billion in debt. DirecTV will provide to LEI up to $650 million in funding pursuant to a term loan facility in order to service the LEI debt.
The businesses, assets and liabilities of the Liberty Entertainment group tracking stock not included in the split-off of Liberty Entertainment will continue to be attributed to the Liberty Entertainment group, which will be renamed "Liberty Starz."
Liberty Starz will consist of Starz Entertainment, 37% of WildBlue, PicksPal, Fanball and approximately $650 million in cash and cash equivalents. The Series A Liberty Starz common stock and Series B Liberty Starz common stock are expected to be listed on NASDAQ under the symbols LSTZA and LSTZB, respectively.