Liberty Proposes Interactive Changes

Liberty Media made moves Monday to convert its Liberty Interactive tracking stock into an asset-backed security, initiating a characteristically complicated transaction that involves the spin-off of two other tracking stocks - Liberty Capital and Liberty Starz.
According to Liberty Media, Liberty Media Corp., the parent of all three tracking stocks, will create a separate entity called "Newco," and shareholders of Liberty Capital and Liberty Starz will receive shares of the Newco stock. Both Liberty Capital and Liberty Starz will continue to trade as tracking stocks and will contain the same assets as before the split. Liberty Capital contains Starz Media, LLC, the Atlanta Braves Major League Baseball team, and TruePosition, Inc., Liberty Media's interest in Sirius XM Radio, and minority equity investments in Time Warner Inc., Time Warner Cable and Live Nation. Liberty Starz contains premium channel Starz Entertainment and was spun off from Liberty Entertainment last November.
While the deal will not materially change Liberty Starz or Liberty Capital, the end result of the transaction will be the conversion of Liberty Interactive from a tracking stock into an asset-based security. Liberty Interactive currently contains 100% of cable shopping channel QVC, Provide Commerce,, Buyseasons,, and interests in IAC/InterActiveCorp and Expedia.
"An asset-backed Liberty Interactive will provide better transparency on Liberty's operating businesses, enable more efficient capital raising, and permit us to better pursue our strategic objectives, including acquisitions using stock," Liberty Media CEO Greg Maffei said in a statement. "We also believe the split-off will be positive for the long-term credit outlook at Liberty Interactive."
The deal, which would require the necessary regulatory and shareholder approvals, is expected to be completed later this year or in early 2011.
On a conference call with analysts, Maffei said the transaction could remove the tracking stock discount that has hampered all three stocks.
Investor reaction was somewhat mixed. Liberty Capital stock finished Monday up $2.17 each (5.2%) to close at $43.95 per share and Liberty Interactive rose 21 cents each (1.7%) to $12.56 per share. Liberty Starz stock closed at $52.35 each Monday, down 7 cents per share.
Maffei added that the new Liberty Interactive structure could allow for more acquisitions, although the company had no immediate plans. While home shopping channel HSN Inc. is an obvious target for QVC, Maffei said not at the current price.
"We're certainly not going to chase HSN stock," Maffei said.
HSNI shares closed at $25.01 each on Monday, up 11 cents (0.4%) per share.