Liberty: HSN Off Shopping List

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Liberty Media’s moves last week
to convert its Liberty Interactive tracking
stock into an asset-backed security fueled
speculation the John Malone-chaired media
giant is on the hunt for deals — speculation
the company adamantly protests.

In a characteristically complicated effort to
be more “tax-efficient,” what in effect is a spin
of Liberty Interactive from parent Liberty Media
is instead a spinoff of two other tracking
stocks, Liberty Capital and Liberty Starz.

Liberty Media Corp., the parent of all three
tracking stocks, will create a separate entity
called “Newco,” shares of which shareholders
of Liberty Capital and Liberty Starz will

Liberty Capital and Liberty Starz will continue
to trade as tracking stocks and will contain
the same assets as before the split.

Liberty Capital includes Starz Media LLC;
Major League Baseball’s Atlanta Braves franchise;
TruePosition; Liberty Media’s interest
in Sirius XM Radio; and its minority equity
investments in Time Warner Inc., Time Warner
Cable and Live Nation.

Liberty Starz contains premium channel
Starz Entertainment and was spun off from
Liberty Entertainment last November.

Liberty Interactive currently contains 100%
of cable-shopping channel QVC and Provide
Commerce, and interests in Backcountry.
com, Buyseasons,, IAC/
InterActiveCorp and Expedia.

Liberty expects the transaction to close
by early 2011, pending regulatory and shareholder

Liberty Media CEO Greg Maffei said the
idea is to “provide better transparency on Liberty’s
operating businesses, enable more efficient capital raising and permit us to better
pursue our strategic objectives, including acquisitions
using stock.”

Mentioning acquisitions triggered some
speculation that deal-maker John Malone,
the company’s chairman, was getting ready
to buy something.

Maffei tried to downplay that speculation
in a call with analysts, saying no deals are anticipated
at the moment.

The logical acquisition target for Liberty
Interactive is No. 2 home-shopping channel
HSN (of which Liberty already owns 33%).
Maffei said that won’t happen for now.

Liberty can’t expand its interest in HSN
above 35% until August, a restriction connected
to the 2008 restructuring of IAC.
“Watch August come and go,” Maff ei said
on the call.

“We’re certainly not going to chase HSN
stock,” Maffei also said.

Liberty tried to acquire the remaining interest
in HSN several years ago, but reached
an impasse with IAC chairman Barry Diller
over price.

As HSN currently trades at nearly twice
the per-share price of Liberty Interactive,
that valuation rift still exists.

Maffei also said Liberty is trying to remove
the tracking stock discount that holds back
all three stocks.

In the meantime, Liberty could be a seller
of some smaller assets. Press reports last
month speculated Starz Media, the video
production business that’s contained in Liberty
Capital, and the Overture Films studio
could be sold for as much as $200 million to a
group that was also bidding on The Walt Disney
Co.’s Miramax studio unit.

Miller Tabak media analyst David Joyce believes
Starz Media could be combined with
Liberty Starz and sold to a larger studio.

Not happening, Maffei said on the call.
“Starz Media is in the Liberty Capital tracker,”
he said. “There is no intention to spin anything
out of these businesses today.”

The three stocks enjoyed modest gains after
Liberty disclosed the transaction news
last Monday. Liberty Capital stock rose $2.17
(5.2%) on June 21 to close at $43.95. Liberty Interactive
rose 21 cents (1.7%) to $12.56. Liberty
Starz stock closed at $52.35, down 7 cents.