Malone’s Liberty Has Cash to Spend


With as much as $10 billion in available liquidity
after the planned spinoff of its Liberty Interactive
unit later this month, Liberty Media is preparing to
put that money to work, including acquisitions and share
buybacks, chairman John Malone told an audience at the
company annual meeting of shareholders last week.

Liberty has been trying to
spin off Liberty Interactive —
which includes QVC, Provide
Buyseasons,, and interests in IAC/Inter-
ActiveCorp and Expedia — as an
asset-backed security since June
2010. Malone said that the spinoff
has handcuffed Liberty to
some extent.


“We’ve been pretty frozen by this
split-off interregnum,” Malone said at the meeting. “You
can probably expect a lot more activity by us post the
split-off . There are a number of things we would like to
pursue, we have a lot of liquidity and it would be a very
good time to do acquisitions on a levered basis. That’s not
saying we’ve got a bunch of them identified. Right now,
the cheapest thing around is our own stock.”

The spin has been held up by a group of bondholders
led by Bank of New York Mellon Trust that have
filed suit in Delaware Chancery Court claiming that
it constituted a disposition of assets and would harm
debt holders. While the court ruled in May against the
bondholders, they filed an appeal in June.

At Liberty’s annual meeting of shareholders in Denver
on Wednesday, CEO Greg Maffei said a hearing on the
matter is scheduled for Sept. 14, where Liberty hopes the
original ruling is upheld. If that’s the case, the spin would
happen the next day.

Maffei said that after the spin Liberty would have about
$8 billion — “maybe as much as $10 billion if we really
had to reach” — in liquidity, which
he intends to “invest wisely.” That
could be in several areas he noted,
such as e-commerce opportunities,
Liberty’s own stock, acquiring
or investing in new free cash
flow generating businesses, or
beefing up its existing positions
in other businesses.

Asked if shareholders should
expect Liberty to delve into companies
outside the realm of traditional
media, like its recent
investments in book retailer
Barnes & Noble, Malone said the goal is to invest in or
acquire businesses where its management can have an
impact. He pointed to investments in Sirius XM Radio,
now the largest holding in Liberty Capital, that has grown
from a $530 million investment in 2009 to an asset worth
more than $6 billion today.

Malone said that over the years Liberty has grown and
spun off a large range of businesses, including satellite-
TV giant DirecTV Group, international cable company
Liberty Global, and cable programmer Discovery Communications.

“If we held on to them, we would be the largest and
most confused conglomerate in the world,” Malone said.
“The goal is not to be megalomaniacal. The goal has been
to create long-term shareholder value.”

Maffei commented on what some analysts have called
a missed opportunity for the company’s Liberty Starz
unit in its decision not to renew its distribution agreement
with Netflix. The old deal expires in 2012.


Maffei said that while he was confident Starz could have
reached a renewal agreement with Netflix, he was concerned
about the direction the video juggernaut is taking.
Netflix recently restructured its pricing schemes to
place more emphasis on online distribution of content.

Maffei said that a renewed deal would have forced
Starz to pay overages to its content and studio partners
and would have placed it in larger conflict with its traditional
cable, satellite and telco partners — which he said
pay Starz a collective $1.2 billion a year.

Malone added that the main conflict centers on the
subrogation of brand identity and pricing control, issues
that he said are hampering online delivery across
the board.

“Taking it all and dumping it in at wholesale on a random
access basis really undermines long-term perceived
value,” Malone said. “That’s the biggest problem conceptually
that we have with the Netflix approach toward distribution
as a content investor or owner.”