Liberty Media said Wednesday that it plans to spin off its Liberty Entertainment -- which holds premium pay movie service Starz Entertainment -- into a separate, free-standing company.
A press release said it is expected that both companies would have the same corporate executives.
At the moment, Liberty Entertainment is simply a tracking stock that is wholly owned by Liberty Media. The change will simplify the structure of Liberty Media, which is led by legendary cable-TV executive John Malone.
"We believe converting the Liberty Entertainment tracking stock to an asset-backed security will create a stronger currency and allow greater flexibility to pursue our strategic objectives," Liberty Media CEO Greg Maffei said in a statement.
Besides Starz, Liberty Entertainment would also hold 50% of DirecTV Group, Fun Technologies, Liberty Sports Holdings, 50% of GSN and 37% of WildBlue Communications if the spinoff goes forward as currently planned.
Liberty Entertainment would also shoulder $2 billion of debt related to the DirecTV shares and other debt would be shuffled.
The spinoff will be a tax-free, cashless stock distribution in which shareholders of Liberty Media (ticker symbol LINTA) will get the stock of Liberty Entertainment (LMDIA).
“This ‘hard spin’ is consistent with our thesis on [Liberty Media], namely that over time, it would shift to an asset-backed equity in its evolution to a true operating company,” Morgan Stanley Research said in a note, adding that it is upbeat on the Liberty Entertainment spinoff. “We also believe this spin increases the likelihood of a transaction with DirecTV Group, of which LMDIA is a 50% owner.”
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