Liberty Media Corp. said it has initiated a process that could change the
ownership structure of its partnership with Comcast Corp. in cable shopping
network QVC.
Liberty, in a press release Monday, said it has notified Comcast of its
decision to trigger the exit process.
According to the agreement, Liberty and Comcast are required to attempt to
reach an agreement on the fair market value of QVC, either mutually or through
an independent appraiser, within 30 days after Liberty's notice.
Comcast will then have 30 days in which to purchase Liberty's 42.5 percent
stake in QVC. If Comcast opts not to purchase the network, Liberty can buy
Comcast's 57.5 percent interest. If neither Comcast nor Liberty opt to buy QVC,
100 percent of the shopping network would be sold to a third party.
Liberty has had the right to put its interest in QVC to Comcast every year
for three years. The latest put right started Feb. 10.
Many analysts expect Liberty to buy out Comcast's interest in QVC, which they
estimated to be worth about $7 billion.
Those same analysts suggested that even though QVC is a cash cow for the
company, Liberty stands to gain more from a purchase because it would then be
allowed to consolidate QVC's cash flow into its own balance sheet.
Comcast already consolidates QVC's cash flow, which was
$858 million, up 18.8 percent, in 2002. Revenue at the unit was $4.4 billion, up
12 percent in 2002.
Comcast executive vice president and treasurer John Alchin, speaking at The
Bear Stearns Cos. Inc.'s Media, Entertainment & Information conference in
Palm Beach, Fla., Monday, said Comcast would not issue debt or stock for any
transaction related to the Liberty put, fueling speculation that Liberty could
end up with the entire network.
"Our investment-grade rating is sacrosanct. That will not be sacrificed as a
part of any transaction that is done," Alchin said at the conference.
He added that Comcast also believes its stock is undervalued, and that the
MSO is "not particularly keen to be issuing stock at these levels."
He said if Comcast were to sell the asset back, the MSOs balance sheet would
be even stronger.
Alchin stressed that Liberty and Comcast could opt to do nothing, "or concoct
some other transaction that is not even contemplated in the agreement."
That could involve part of its 21 percent interest in a future Time Warner
Cable initial public offering or parts of its other cable
networks.
