Liberty To ‘Hard Spin’ Liberty Entertainment

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Liberty Media said Wednesday that its board of directors has authorized a “hard spin” of its Liberty Entertainment tracking stock, a move that will convert the tracker into a separately traded public entity backed by hard assets, including Liberty’s 50% interest in DirecTV.

In a statement Wednesday, Liberty said its board has authorized the development of a plan to distribute to holders of Liberty Entertainment shares of a subsidiary called Liberty Entertainment Inc. and is intended to be tax-free to stockholders.

“We believe converting the Liberty Entertainment tracking stock to an asset-backed security will create a stronger currency and allow greater flexibility to pursue our strategic objectives,” Liberty Media CEO Greg Maffei said in a statement.

If the split goes as planned, Liberty Entertainment will include the 50% interest in DirecTV; 100% of Starz Entertainment, FUN Technologies and its two regional sports networks Liberty Sports Holdings LLC; 50% of cable network GSN; and 37% of WildBlue Communications.

In a research note, JP Morgan Securities analyst Bryan Goldberg called the combination a possible first step toward a full consolidation of DirecTV into the Liberty Entertainment entity.

“In our view, a hard spin of [Liberty Entertainment] should theoretically improve [Liberty Entertainment’s] valuation, making a potential [DirecTV] transaction less dilutive to Liberty shareholders,” Goldberg wrote in a research note. “Expect a tax-free distribution to [Liberty Entertainment] shareholders within 3 to 4 months.”    

Liberty Entertainment shares were up 36 cents each (1.3%) to $27.48 per share in early trading Wednesday.

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