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Cable Technology Feature Article

May 04, 2009

DirecTV, Liberty Entertainment to Merge

By Michael Dinan, TMCnet Editor

In a move that will deliver more control of operations to broadcast media mogul John Malone, the company that owns a majority stake in DirecTV Group Inc. will combine the digital satellite TV service with its own entertainment group and spin both of them off into a new entity.
Officials with Liberty Media Corporation say that merging DirecTV (News - Alert) with Liberty Entertainment also will help El Segundo, California-based DirecTV’s shareholders by adding key assets – namely, Game Show Network, FUN Technologies and three regional sports networks.
“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,” said DirecTV’s president and chief executive officer, Chase Carey.
Specifically, once Liberty Entertainment is spun off from Liberty Media, it will include: 54 percent of DirecTV stock; Liberty Sports Holdings; a 65 percent interest in Game Show Network; Fun Technologies; and about $30 million in cash and $2 billion in debt.
Liberty’s president and chief executive officer, Greg Maffei, said the transaction clarifies DirecTV’s capital structure, reduces its shares outstanding, eliminates stock overhang and arbitrage issues, and provides DIRECTV with strategic content businesses.
“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,” Maffei said.
The spinoff of Liberty Entertainment had been disclosed, but no details were announced until today. Malone, his wife and associated trusts will hold shares giving them about 24 percent of DirecTV’s total voting power.
Currently the chairman of Liberty Media and chief executive officer of Discovery Holding Company, Malone is a former director of the National Cable & Telecommunications Association who spent the bulk of his career as president and chief executive officer of Tele-Communications Inc.
To help service Liberty Entertainment’s debt, DirecTV will provide it with up to $650 million in funding. Class A shareholders of the new unit are entitled to one vote per share, while Class B (News - Alert) stockholders will be entitled to 15 votes per share, the companies said.
The deal likely will be completed by the end of 2009. Carey will continue to serve as DirecTV’s president and chief executive and DirecTV’s current board, including Liberty’s representatives, also will likely continue to serve, according to the companies.

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Michael Dinan is a contributing editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To read more of Michael's articles, please visit his columnist page.

Edited by Michael Dinan