Liberty Int'l Wraps $730M Rights Offer

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Liberty Media International completed its previously announced rights offering last week, raising about $730 million that could be used to roll up small cable operators in Japan.

The offering closed Aug. 23, and in a statement Aug. 30 Liberty said that the offering was fully subscribed — rights were exchanged for 27.7 million Series A shares and 1.2 million Series B shares.

About 515,000 shares — 506,000 series-A and 9,000 series-B shares — remain available for overallotments.

The rights offering allowed current LMI shareholders to purchase shares at discounted prices – holders of Series A shares received rights to purchase 0.20 shares for every full share they owned at $25 each; each Series B share received the right to buy an additional 0.20 B shares at $27.50.

The rights offering was originally initiated to raise money to buy out Microsoft Corp.’s 19% interest in Japanese cable MSO Jupiter Telecommunications Co. (LMI owns 45% of the MSO, Japanese banking giant Sumitomo Corp. owns the rest).

In a conference call with analysts discussing LMI’s second-quarter results last month, chairman John Malone said that won’t likely be the case.

Janco Partners analyst Matt Harrigan said that while the Microsoft buyout is on hold for now, it is likely that LMI will use the proceeds for additional acquisitions in the Japanese market.

“They perceive Microsoft as an eventual seller, but Microsoft is content to stay with the status quo as it is right now,” Harrigan said. “They could do more acquisitions in Japan, although obviously those are principally to be done by Jupiter. [A Microsoft buyout] certainly is what the initial expectation was on the rights sale proceeds, but I don’t think that’s happening imminently.”

Harrigan said LMI isn’t expected to use the money for other international cable acquisitions outside of Japan — it owns properties in Latin America and in Europe through its 57% interest in UnitedGlobalCom Inc. — because it has other vehicles for those types of deals.

“Japan is the most logical venture to apply the proceeds [of the rights offering],” Harrigan said. “They don’t really have any debt at LMI. Under the right circumstances, they could buy some additional UGC shares — that’s a possibility. UGC itself authorized a modest share repurchase.

“But I don’t see anything happening imminently that bombs through the entire rights offering proceeds.”

The rights offering has been a drag on LMI stock, mainly because investors were worried about possible dilution. The offering increases LMI’s outstanding shares to 175 million from 146 million.

LMI, though, closed at $33.44 on Sept. 1, down only 36 cents.