Starz Founder's Options Pay Off

Starz Founder and former CEO John Sie had 150
million reasons to smile at the premium network’s
performance last year.

According to
documents filed with
the Securities and
Exchange Commission
last week, Liberty
Starz paid Sie $150
million in cash during
the fourth quarter as a
settlement to phantom
stock appreciation rights held by the executive.

Sie, who founded Starz in 1991, retired in
2004. As part of his exit package, Sie was eligible
for $275 million in phantom stock appreciation
rights (PSARs), of which he exercised 54% when
he retired. PSARs are basically a promise to pay
a bonus in the form of the equivalent of either the
value of company shares or the increase in that
value over a period of time.

According to the 10-K, Sie decided to exercise
his remaining PSARs in 2009 and after his holdings
were reappraised, taking into account appreciation
of the shares over time, Starz made the payment in
December. Sie’s timing was impeccable, as the value
of his PSARs increased nicely during the period —
based on the estimated value of the PSARs in 2004,
it looks as if the former executive got a $23.5 million
bump with the new appraisal. Liberty Media spun off
Liberty Starz as a tracking stock in November 2009 at
around $47 per share. Since then, the stock has risen
53% and was priced at $71.64 each on March 1.

Starz parent Liberty Media did not name Sie in
its 10-K annual report filed with the SEC on Feb.
28, instead saying it paid the $150 million in cash
to the founder and former CEO of Starz. A company
spokesperson confirmed that was Sie.

Liberty said that Sie has had the right to exercise
his remaining PSARs since 2004, and the valuation
of the shares is part of the normal process.

The payout settles Sie’s account with the premium
channel. He will not participate in the planned spin of
the Liberty Starz tracker slated for later this year.