May 4, 2009
Liberty Media Corp. (NYSE: LMC) plans to spin off DirecTV Group Inc. (NYSE: DTV) as a separately traded company, but the "new" version of DirecTV will be joined by a few other media assets. (See WildBlue Makes Stimulus Pitch .)
Under terms announced Monday, Liberty Media will combine DirecTV, a company that touts 17.6 million U.S. video subs, with Liberty Entertainment Inc. The combined company, which will continue to operate as DirecTV, will also take on operation of regional sports networks based in Denver, Seattle, and Pittsburgh, Game Show Network (GSN), and FUN Technologies Inc., a maker of online and interactive sports games. (See Liberty Entertainment Taking Over DirecTV.)
Table 1: The New DirecTV
Ownership Stake (%)
Game Show Network
Fox Sports Net Northwest
Fox Sports Net Pittsburgh
Fox Sports Net Rocky Mountain
Source: Liberty Media, DirecTV, Sanford C. Bernstein & Co. Inc.
Assets historically covered by the Liberty Entertainment group tracking stock that are not included in the DirecTV spinoff will continue on under a new company called Liberty Starz.
Table 2: The New Liberty Starz
Ownership Stake (%)
Source: Liberty Media
Liberty acquired its 54 percent stake in DirecTV in early 2008. The deal aims to "clarify" DirecTV's capital structure, said Liberty Media president and CEO Greg Maffei.
"Since its inception, DirecTV has been controlled by other corporate entities. For the first time, DirecTV's shareholders will control its future without the risk of conflict," DirecTV president and CEO Chase Carey said during this morning's conference call.
The satellite TV company will issue to Liberty shareholders about 519 million shares for those assets. Of that total, 22 million will be "high-vote" shares, with 15 votes per share, and issued to Liberty Media chairman John Malone. That will give him a big voice in the new company, but less influence than he exerted when Liberty Media fully controlled DirecTV.
Carey, who will continue as DirecTV's top exec, said the breakup fee is $450 million. He was also careful to explain Malone's and Liberty's role at the new DirecTV after the spinoff. "We view Dr. Malone as a positive force and a great supporter of DirecTV," he said. Malone will carry on as DirecTV's chairman, and Liberty's president and CEO Greg Maffei will stay on the board of directors.
"This agreement has never been about eliminating their ability to contribute to DirecTV," Carey said.
Don't expect the new DirecTV to pursue wireless and broadband technology and service plays on its own. Chase was clear that DirecTV will continue to provide broadband services through its telco partnerships.
Today, DirecTV uses third-party broadband connections to pipe in video-on-demand (VoD) content, and co-markets its service with AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), Qwest Communications International Inc. (NYSE: Q), and Cincinnati Bell Inc. (NYSE: CBB). (See DirecTV Wins AT&T Deal and DirecTV Wins AT&T Sweepstakes.)
— Jeff Baumgartner, Site Editor, Cable Digital News
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