Liberty to Combine Starz, Capital


Just weeks after it converted its Liberty Interactive unit into an asset backed security, Liberty Media said Thursday that it will combine its Liberty Starz and Liberty Capital units, effectively eliminating its tracking stock structure.

"The board of directors determined this was the right move to increase the value for both Liberty Capital and Liberty Starz shareholders by eliminating the ‘tracker discount', increasing liquidity in the stock and creating a stronger acquisition currency," Liberty Media CEO Greg Maffei said in a statement. "In addition, we recently took advantage of the attractive debt markets to raise capital at Starz, and we have more opportunities to deploy it at a combined Liberty Media."

Liberty has been on a path to simplify its structure for years and by cancelling the tracking stock structure has essentially completed that job.

Liberty practically invented tracking stocks for media companies, which are securities that are not backed by hard assets but do follow a company's performance. The advantage of trackers is that they allow companies to highlight the value of a unit without having to actually spin it off. The disadvantage is that shareholders of trackers typically have limited or no voting rights, have no claim on the assets or the business and cross-liabilities could exist between the tracker and its parent.

Liberty converted its Liberty Interactive unit - including QVC Inc., Provide Commerce, Inc.,, Inc., BUYSEASONS, Inc.,, LLC, Evite, Inc. and GiftCo, Inc., Expedia, Inc., HSN, Inc., Interval Leisure Group, Inc. and, Inc. - into an asset backed security in late September. 

According to Liberty Media, shares of Liberty Starz -- which includes the Starz premium movie channel, will be converted into 0.88129 shares of Liberty Capital on Nov. 28. Liberty Capital includes minority interests in several media companies, its 40% interest in Sirius XM Radio and 17% holding in Barnes & Noble, and the Atlanta Braves Major League Baseball team.

No actions are required by shareholders and the conversion will have no impact on the assets, liabilities or businesses of Liberty. Following the conversion, Liberty will have two classes of stock, trading under the symbols "LMCA" and "LMCB."

News of the combination comes after speculation last week that Liberty was seeking a deal for Liberty Starz, after the unit raised a new credit facility -- $1.5 billion in senior secured credit with a $1 billion 5-year revolver and a $500 million term loan. While news of the combination tempers dome of hat speculation, Miller Tabak media analyst David Joyce wrote in a research note that he expects "M&A activity with these assets to pick up again."

Liberty Media is scheduled to hold its annual Investor Day meeting in New York later today.