Liberty Media received a private letter ruling from IRS relating to the tax treatment of various aspects of the spinoff of Liberty Entertainment
October 27, 2009
EL SEGUNDO, Calif. -- The DIRECTV Group, Inc. (NASDAQ: DTV - News) announced today that Liberty Media Corporation (“Liberty Media”) has received a private letter ruling from the Internal Revenue Service (“IRS”) relating to the tax treatment of various aspects of the split-off of Liberty Entertainment, Inc. (“LEI”), a wholly owned subsidiary of Liberty Media, from Liberty Media (the “Split-Off”). As a result of the Split-Off and the subsequent business combination of LEI with DIRECTV Group (the “DTV Business Combination”), DIRECTV Group and LEI would become wholly-owned subsidiaries of a new public company, named “DIRECTV.” The Class A Common Stock of DIRECTV is expected to be listed on the NASDAQ Global Select Market under DIRECTV Group’s current ticker symbol, “DTV.”
The receipt of the private letter ruling is one of the conditions to the completion of the Split-Off and the DTV Business Combination, and eliminates a potential termination right in favor of Liberty Media that previously existed under the merger agreement. The private letter ruling provides, among other things, that:
the Split-Off will qualify as a tax-free transaction under sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended;
no gain or loss will be recognized by Liberty Media upon the distribution of LEI common stock; and
no gain or loss will be recognized by, and no amount will be included in the income of, holders of Liberty Entertainment common stock upon the exchange of shares of Liberty Entertainment common stock for shares of LEI common stock (except with respect to cash received in lieu of fractional shares).
In addition, the ruling provides requested guidance concerning the impact under applicable tax-related regulations of post-closing open market share repurchases by DIRECTV. Based on that guidance, DIRECTV Group believes that, subject to certain limitations and conditions, DIRECTV will be able to implement an open market share repurchase program following the closing if and to the extent approved by its board of directors based on prevailing market conditions, available cash and other relevant business considerations.
DirecTV Group Inc. (NYSE: DTV)
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