Liberty Votes to Buy Back Shares

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Less than a month after detailing a debt-reduction plan that would drastically reduce its leverage, Liberty Media Corp. made several moves to consolidate voting interests connected to the media giant's equity structure.

Liberty announced a plan Nov. 20 that would reduce its debt by about $4.5 billion over the next two years, and said it would also look into repurchasing some of its stock. Last week, Liberty made several moves to fulfill the latter half of that November plan, engineering three deals that would bring more than 100 million shares back into the fold.

First was a confirmation by the Denver-based media giant that it had purchased 25 million shares of its own stock from Comcast Corp., as part of a deal the MSO struck last week to sell 100 million Liberty shares it acquired when it sold its interest in cable shopping channel QVC Inc.

Liberty did not disclose the purchase price of the shares. Comcast received about 218 million Liberty shares as part of its agreement to sell Liberty its 56.5% of QVC (Liberty already owned the remaining interest).

Comcast hired Goldman Sachs & Co. as underwriter to sell the Liberty shares in a forward sale agreement. According to that transaction, Comcast would receive an up-front payment of approximately $894 million and would be required to deliver between 71.4 million and 100 million shares of Liberty common stock, or the cash equivalent thereof, at maturity of the agreement in approximately 10 years.

Also on Dec. 2, Liberty said it reached an agreement to purchase all of the outstanding stock of TP Investment Inc., an investment vehicle run by Liberty chairman John Malone, in return for Liberty Series B shares valued at about $60.7 million. In the same SEC document, Liberty said it was in preliminary discussions to acquire another 96 million of its Series B common shares from the estate of its late founder, Bob Magness.

According to the filing, Liberty said one possible scenario would involve acquiring a portion of the Magness shares for cash and shares of Liberty's Series A shares, which have fewer votes. That deal, coupled with the TP Investments deal, would reduce Liberty chairman John Malone's voting control of Liberty from 42% to 28%.

As part of a complicated deal reached in 1998, Malone retained voting rights to the Magness shares. However, Liberty said in the most recent SEC filing that if it acquired the Magness shares, those shares would be canceled.

"Because of the reduction in the number of Series B shares outstanding, Mr. Malone's individual voting power would increase to approximately 28%; however, because the Magness group would no longer own any Series B shares, Mr. Malone's overall voting power would decrease from approximately 42% to 28%," Liberty said in the filing.

In a research report, Prudential Securities cable analyst Katherine Styponias said she was encouraged by the deconsolidation of the voting interests and the retirement of common stock. But she added that Liberty shares "will continue to see some overhang given that Comcast will probably seek to monetize its remaining Liberty position sooner rather than later.

"We would also note that the canceling of Series B 'super-voting' shares (should the Magness transaction occur) and the buyback of 25 million Series A shares, while positive, is not likely to significantly impact the demand for the Liberty shares in the market."

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