Liberty’s QVC Deal Cash-Free


About one week after announcing that it would purchase Comcast’s Corp.’s
57.5% interest in cable shopping channel QVC Inc. for $7.9 billion, Liberty
Media Corp. said it would issue 218 million shares of its stock worth $2.6
billion, with the remaining $5.3 billion coming in a three-year note. No cash
would be included in the purchase.

Liberty agreed to acquire the interest it didn’t already own in QVC July 3.
At the time of the announcement, Liberty said it had the option of paying
Comcast in a combination of cash, stock or the three-year note.

The 218 million shares represent about 7.5% of Liberty’s outstanding

Most analysts had expected Liberty to use as much stock as possible in the
deal in order to conserve its own cash for other acquisitions and to lessen the
tax blow to Comcast.

In a research report issued July 7, shortly after the deal was announced,
Credit Suisse First Boston LLC cable analyst Lara Warner estimated that
Comcast’s tax burden for the deal would be $2.85 billion ($7.9 billion, less
Comcast’s $400 million cost basis times 38%).

With the maximum amount of stock, and monetizing those shares on a
tax-deferred basis through collateralized debt or other derivative instruments,
Warner estimated that Comcast’s tax burden would be reduced to $1.9 billion.

Liberty will own about 98% of QVC after the deal is closed. The remaining 2%
will be held by QVC management.