Liberty Interactive completed the spinoff of its electronic-commerce assets, leaving its interests in the top two home-shopping channels as a standalone company, QVC Group, and fueling speculation that the new retail-oriented company could have its eyes on further acquisitions.
Tops on most analysts’ lists would be taking in the rest of No. 2 home-shopping channel HSN Inc., of which QVC Group already owns about 38%. The third largest home-shopping channel — ValueVision Media, which owns ShopHQ — also is a possibility down the road.
The Liberty Interactive spin was in the works for more than a year and was the latest in a series of complicated transactions for the e-commerce company.
Liberty Interactive attributed assets worth about $1.5 billion — e-commerce companies Bodybuiding.com, Backcountry.com, CommerceHub, Evite, Provide Commerce and LMC Right Start — and $1 billion in cash to Liberty Ventures, a tracking stock that was created in 2012 to house Liberty’s e-commerce assets and minority interests in other media companies. In return, Liberty Interactive shareholders received 67.67 million shares of Liberty Ventures common stock (0.14 shares of Liberty Ventures stock for each Liberty Interactive share they own).
The tracking-stock structure is a favorite of Liberty Media chairman John Malone, who practically invented the securities, which follow a company’s performance but are not backed by hard assets. Their advantage is they can highlight a unit’s value without having to actually spin it off. Their disadvantage is shareholders typically have limited or no voting rights and no claim on the assets or business.
As a pure-play retailer, QVC Group could use its new currency to strike deals, including snapping up the rest of HSN, Pivotal Research Group principal and senior media & communication analyst Jeff Wlodarczak said. But in typical Malone fashion, he added, the moves are more likely to remove any analyst confusion around the stock by simplifying its assets and structure. QVC and HSN are television retailers, while the rest of the assets in Liberty Interactive are niche e-commerce companies selling flowers, gifts, nutritional supplements and baby gear. Untethering the TV operations from the other retail assets makes it easier for media investors such as mutual funds to justify investing.
KEEPING IT SIMPLE “I think the main reason they did the swap was driven by the same philosophy they have employed over the last 10 years or so — simplification,” Wlodarczak said. “I assume they believe that essentially ‘standalone’ QVC will trade better and is more likely to get retail analyst coverage without those relatively complicated assets. This should help drive a narrowing of the discount QVC sports to its retail comps.”
The transactions were slightly delayed last month after ProvideCommerce agreed to sell its floral and gift business to FTD.com in return for a 33% interest in the combined business. Liberty also earlier modified its plans for Liberty Digital, instead deciding to place the e-comerce assets in a separate tracker called Liberty Ventures. After the FTD deal closed, Liberty Interactive included the combined interest in ProvideCommerce in Liberty Ventures.
Liberty also has plans to issue another tracker — Liberty Broadband — which will house its 27% interest in Charter Communications, its interest in global positioning satellite subsidiary TruePosition and its minority equity investment in Time Warner Cable.
Liberty Broadband could go off on its own to acquire cable assets, but CEO Greg Maffei has said publicly that that Liberty’s respect for the Charter management team, the benefits of scale and the synergies inherent in the MSO’s assets make it unlikely that the company would go outside of Charter for acquisition opportunities inside the United States.
With the attribution of its e-commerce assets into Liberty Ventures and the creation of QVC Group, Liberty Media has continued on a path of simplifying and separating its diverse stable of assets.
Liberty Ventures: Bodybuiding.com (90%); Backcountry.com (90%); CommerceHub (99%); Provide Commerce; LMC Right Start (95%); Expedia Inc. (18%); Evite (100%); Interval Leisure Group (29%); Tree.com (25%).
QVC Group: QVC (100%); HSN Inc. (38%)
Liberty Broadband [Expected to debut by the end of this year or early next year]: 27% interest in Charter Communications; TruePosition (100%); Time Warner Cable (1%)
Liberty TripAdvisor Holdings: TripAdvisor (22%); BuySeasons (100%)
Liberty Media: Associated Partners (37%); Atlanta Braves; Barnes & Noble (2%); Crown Media Holdings (3%); Ideiasnet (5%); Kroenke Arena Co. (7%).; Liberty Associated Partners (29%); Live Nation (27%); Mobile Streams (16%); Sirius XM (56%); Tastemade (6%); 1% or less interests in Time Inc., Time Warner Cable, Time Warner Inc. and Viacom
SOURCE:Multichannel News research