Tele-Communications International Inc. (TINTA), the
international cable and programming arm of Tele-Communications Inc., said last week that
its board of directors approved a merger plan for Liberty Media Group to buy all TINTA
shares not owned by TCI Ventures Group.
TCI Ventures already owns 83 percent of TINTA's series
A and series B shares, and those stakes will go to Liberty after Liberty's pending
merger with TCI Ventures closes.
In June, Liberty offered 0.58 shares of Liberty series A
stock for each TINTA share held by the public -- an offer that some shareholders thought
was too low, prompting them to file class-action lawsuits.
TINTA said the merger agreement keeps that exchange ratio,
but it ensures that public shareholders will get at least $22 per share in Liberty stock.
If Liberty's stock falls below a level that would provide that value, TCI will either
increase the ratio or terminate the merger. The value will be based on the average of
closing sale prices during a five-day period shortly before the merger's closing
That assurance enabled TINTA to agree in principle to
settle the shareholder suits. While Liberty -- which will be controlled by TCI chairman
and CEO John Malone after the TCI-AT&T Corp. merger closes -- did not raise its price,
it did guarantee TINTA holders a minimum payout. If Liberty shares go up, the upside also
goes to TINTA holders.
What's more, barring a huge dip in Liberty's
price, Liberty is quite likely to raise the conversion rate in order to ensure full
control of "the rich trove of TINTA assets," Goldman Sachs & Co. cable
analysts said in a report last week. Goldman dropped TINTA from its recommended list,
simply because its share price had risen above the $22 floor.
TINTA's share price closed at $22.44 last Monday,
after the agreement was announced, up from $21 the previous Friday, and Liberty's
share price rose to $36.06 from $35.81. Goldman noted that at $36.06, Liberty would need
to issue 0.61 shares for each TINTA share.
By last Wednesday's close Liberty was down to $35.25,
and TINTA was at $21.88.
Janco Partners media analyst Ted Henderson predicted that
TINTA holders "are going to be thrilled" with the current offer.
The $22 floor is based on the current positions of the two
stocks, he said, and the TINTA shares will be exchanged for far more liquid Liberty
shares. Henderson also likes the prospect of Malone-led Liberty acting as a wealthy
venture-capital fund, better positioned to find the right synergies with TINTA assets.
Malone and other TCI executives have said that they see
TINTA's future as more of a programming play, with distribution assets only as needed
to benefit the programming.
It's considered likely that AT&T, which wants to
be an international facilities-based carrier, will want some TINTA system assets, such as
its 26 percent stake in Telewest Communications plc in the United Kingdom. Assets like
TINTA's 36 percent of U.K. programmer Flextech plc are likely to stay in the Liberty
TINTA's other distribution assets include 40 percent
of Jupiter Telecommunications Co. Ltd. in Japan and 26 percent of Cablevision S.A. in
Argentina. Programming assets include 33 percent of France's MutliThematiques, 25
percent of Fox Sports International and 50 percent of Jupiter Programming Co. in Japan.
TINTA's board set Oct. 2 as the record date for
determining the stockholders that are entitled to vote at a special meeting in November to
approve the merger. The merger is expected to close later that month.
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