DirecTV, Liberty Media Detail Spinoff Plans
DirecTV Group Inc., the nation's largest satellite TV provider, said Monday it will be combined with the entertainment unit of Liberty Media Corp. and spun off into a separately traded company.
The deal will give DirecTV assets that would enhance the offerings of its satellite TV operations: regional sports networks in Seattle, Denver and Pittsburgh as well as a 65 percent stake in the Game Show Network and FUN Technologies, a provider of online sports games and information.
Media mogul John Malone, who controls Englewood, Colo.-based Liberty Media, will have a 24 percent voting stake in the new company, down from the 48 percent Liberty now holds. He will remain chairman of DirecTV, as the board and top executive ranks will stay intact.
"Since its inception, DirecTV has been controlled by other corporate entities. For the first time, DirecTV's shareholders will control its future," said Chase Carey, chief executive of DirecTV, in a conference call with analysts.
DirecTV once was a business within the Hughes Electronics unit of General Motors Corp. News Corp. took control in 2003, and then DirecTV fell into Liberty Media's sway in February 2008. Back then, Liberty Media swapped its stake in News Corp. plus cash for a controlling stake in DirecTV and the three regional sports networks.
The latest deal is expected to close in the fourth quarter. DirecTV expects to incur an estimated $300 million to $400 million charge as a result.
Shares of El Segundo, Calif.-based DirecTV were down 64 cents, or 2.6 percent, to $23.93 in afternoon trading. Liberty Entertainment was up 94 cents, or 4 percent, to $25.27.
Murray Arenson, senior analyst at Janco Partners in Denver, said the deal simplifies the equity structure at DirecTV and gives it added flexibility to enter partnerships with other companies. "It's a good deal," he said.
DirecTV has done well even in this recession as consumers opt to stay home for entertainment. It has focused on the most creditworthy customers who value their TV programming more than they want to get a good deal. DirecTV's next quarterly earnings report is Thursday.
The new company will have $30 million in cash and $2 billion of debt. It also will have access to $650 million in funding through a term loan facility.
The new DirecTV will have two classes of stock. One will have one vote per share while the other holds 15 votes per share. Malone, his wife and associated trusts will hold DirecTV shares that give them 24 percent voting control in the new company.
Liberty Media has traded as three separate tracking stocks that represent its holdings in interactive, entertainment and other businesses. For this deal, Liberty Entertainment will be separated from Liberty Media, and then DirecTV will be merged into Liberty Entertainment to form a new company under the DirecTV name. The rest of the entertainment unit not included in the spin-off will operate under the name Liberty Starz.
Once the deal goes through, Malone will hold 3 percent of DirecTV's stock directly and 24 percent voting control. Liberty Entertainment shareholders as a whole will own 52 percent of the new company.
Under the deal, holders of the Liberty entertainment tracking stock will get one class A share of the new company for each share they hold. In addition, the tracking stock's class A holders will get 0.1 share of the new company's class A stock for each share while the class B owners will get 0.1 class B shares.
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AP Technology Writer Barbara Ortutay in New York contributed to this report.
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DEBORAH YAO | May 4, 2009 04:15 PM EST |
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