Liberty to Combine Starz, Capital

Just weeks after it converted its Liberty Interactive unit into an asset backed security, Liberty Media said Thursday that it will combine its Liberty Starz and Liberty Capital units, effectively eliminating its tracking stock structure.

"The board of directors determined this was the right move to increase the value for both Liberty Capital and Liberty Starz shareholders by eliminating the ‘tracker discount', increasing liquidity in the stock and creating a stronger acquisition currency," Liberty Media CEO Greg Maffei said in a statement. "In addition, we recently took advantage of the attractive debt markets to raise capital at Starz, and we have more opportunities to deploy it at a combined Liberty Media."

Liberty has been on a path to simplify its structure for years and by cancelling the tracking stock structure has essentially completed that job. Liberty practically invented tracking stocks for media companies, which are securities that are not backed by hard assets but do follow a company's performance. The advantage of trackers is that they allow companies to highlight the value of a unit without having to actually spin it off. The disadvantage is that shareholders of trackers typically have limited or no voting rights, have no claim on the assets or the business and cross-liabilities could exist between the tracker and its parent.

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