Liberty Entertainment Spin Back On Track


Liberty Media Corp. said that its board of directors has authorized the split off of its Liberty Entertainment tracking stock into an asset-based security, but did not elaborate on when such a transaction would take place.

Liberty announced in September its intention to split off the Liberty Entertainment tracker in a “hard spin,” that would include its 52% interest in satellite TV giant DirecTV, its 100% interest in Starz Entertainment, its three regional sports networks and other assets. Some analysts had believed that the spin was a first step in obtaining 100% ownership of DirecTV.

In a statement late Friday, Liberty said that owners fo the tracker would receive shares in a subsidiary that will hold the interest in DirecTV, three regional sports networks (Liberty Sports Entertainment), a 50% interest in cable network GSN, 100% of FUN Technologies and about $2 billion in debt. The Liberty Entertainment tracker (LMDI) will continue to exist and will contain Liberty Media’s 100% interest in Starz Entertainment, its 37% interest in wireless broadband company WildBlue Communications and an undetermined amount of cash.

The logic behind the hard spin has been to close the gap between the price of the tracker and the value of the assets it contains. The Liberty Entertainment tracker has been hammered in recent months – the stock is down nearly 50% ($12.79 each) this year, from $25.75 in January to $12.96 on Dec. 12.

But the new asset-based stock would be easier for investors to value and could merge with another entity – including DirecTV or be sold to third parties.

"We continue to work on a plan to split-off Entertainment," Liberty Media CEO Greg Maffei said in a statement. "We believe a new asset-backed security will reduce the discount from fair value in our stock, thereby making it a more attractive currency, and will permit us to better pursue our strategic objectives."

Just last week at the UBS Media and Communications conference, Maffei said that the hard spin of Liberty Entertainment was the “preferred path,” but would not rule out a deal being scrapped.