DirecTV, Liberty Ent. To Be Spun Off

By Greg Tarr -- TWICE, 5/4/2009

El Segundo, Calif. — DirecTV said Monday that it will be joined with the broadcasting and programming assets of Liberty Media’s Liberty Entertainment unit and spun off.

The move joins the direct-to-home satellite-TV provider with Liberty's programming units, including Liberty Sports, the Game Show Network and Fun Technologies.

Through the arrangement, the new entity will assume $2 billion of Liberty's debt and $30 million in cash. DirecTV will also make $650 million in Liberty loan payments.

"This transaction clarifies DirecTV's capital structure, reduces its shares outstanding, eliminates stock overhang and arbitrage issues, and provides DirecTV with strategic content businesses," said Greg Maffei, Liberty president and CEO. "And this transaction offers value to Liberty's shareholders by eliminating the discount in our tracking stock structure and allowing them to continue to participate directly in the strong performance of DirecTV.”

No changes will be made to top management under the plan. Upon completion, Liberty Media Chairman John Malone will control 24 percent of DirecTV.

"We are pleased to announce this transaction as it will rightly put the control of DirecTV in the hands of DirecTV shareholders,” said Chase Carey, DirecTV president and CEO. "Our existing equity structure was less than ideal. The transaction will improve our ability to pursue strategic initiatives that can enhance value for all DirecTV shareholders. Additionally, in Game Show Network, Fun Technologies and the three regional sports networks, we are acquiring valuable assets that fit in well with the future of the DirecTV business. We look forward to having the benefit of John Malone's involvement, as a significant shareholder and as chairman of DirecTV's board post-merger.”

The new entity, which will be called DirecTV, will become the parent company of the former DirecTV Group and Liberty Entertainment.

The businesses, assets and liabilities of the Liberty Entertainment group tracking stock not included in the split-off of Liberty Entertainment will continue to be attributed to the Liberty Entertainment group, which will be renamed Liberty Starz.

Liberty Starz will consist of Starz Entertainment; 37 percent of WildBlue, PicksPal and Fanball; and approximately $650 million in cash and cash equivalents.

Analysts said the consolidation of Liberty's TV broadcasting and programming units could help clear the way for Liberty Media's eventual control of Sirius XM. In February, Liberty Media rescued Sirius from bankruptcy by giving it $530 million loan, which in turn gave Malone a 40 percent stake in the satellite-radio company.