Liberty Global chairman John Malone is a step closer to facing off in the British cable biz with long-time frenemy Rupert Murdoch. European authorities today cleared Liberty’s $23.3B takeover of UK cable operator Virgin Media. The European Commission said its investigation “confirmed that the transaction would not raise competition concerns, in particular because the parties operate cable networks in different Member States and because of the merged entity’s limited market position in the wholesale of TV channels in the UK and Ireland.” Liberty already operates in 10 European Union states, including Ireland, but not the UK. Virgin is the second largest pay-TV operator in the UK where it competes, notably, with the News Corp.-controlled Sky. The Commission said the combined group “would still face sufficient competitive constraint from other players.” The deal was originally announced in February. In March, we reported that Virgin Media CEO Neil Berkett will exit with $86.8M in severance, options and rewards once the transaction is completed.
The former King of Cable — who recently agreed to buy more than 27% of Charter Communications – has a bracing warning for companies such as Disney and News Corp that hope to keep raising prices for their sports programming. “You have an unsustainable model,” he told CNBC’s David Faber in an interview. About 80% of viewers would not even pay the wholesale cost for sports if given a choice, he says. And pay TV providers may offer that, perhaps by teaming up with Netflix. “This stuff is getting too expensive for too many households.”
Liberty Media Chairman John Malone‘s company controls Sirius XM, but he and Liberty General Counsel Charles Tanabe no longer want to sit on the satellite radio provider’s board, according to the company’s proxy filed at the SEC this afternoon. No problem: The replacements likely won’t lead a palace revolt. Discovery CEO David Zaslav pretty much owes his job to Malone, who controls about 29% of Discovery’s voting shares, and sits on its board. And Malone’s 42-year-old son, Evan, sits on Liberty’s board and lately has worked in engineering and real estate in Philadelphia where he also runs a wine bar. Aside from that news, the proxy offers the usual info about executive compensation — including the 2012 package for former CEO Mel Karmazin, who left in December. It includes $1.5M salary, and a $9.5M bonus. The total is 5.3 times more than the median for the other top execs, which would trigger alarm bells about Karmazin’s clout if he were still there. Shareholders at the May 21 annual meeting in New York will vote on an investor-submitted resolution that would require Sirius XM to regularly disclose a detailed succession plan. The board opposes the proposal, calling it “unnecessary.”
In a further sign of John Malone’s increasing European cable ambitions, Liberty Global has acquired a 12.65% stake in Dutch operator Ziggo. It’s paying 632.5M euros ($810M) for the minority stake in the Netherlands’ biggest cable company that serves around 3M households. Liberty Global is already in the Dutch cable TV business via its subsidiary UPC, the area’s second largest provider. Global said today that it considers the acquisition of the minority Ziggo stake as “an attractive opportunity to make a strategic investment in a market where it already enjoys a sizeable presence.” Earlier this month, Liberty Media agreed to pay $2.62B For 27.3% of Charter Communications in the U.S. and in February, Liberty Global said it would acquire the UK’s Virgin Media in a stock and cash deal valued at approximately $23.3B.
UPDATE 5:21 PM: Liberty Global and Virgin Media confirmed late today that Liberty will acquire Virgin Media. Here’s the release:
ENGLEWOOD, Colo.–Liberty Global, Inc. (“Liberty Global”) (NASDAQ: LBTYA, LBTYB and LBTYK) and Virgin Media Inc. (“Virgin Media”) (NASDAQ: VMED; LSE: VMED) today announced that they have entered into an agreement, subject to shareholder approvals, pursuant to which Liberty Global will acquire Virgin Media in a stock and cash merger valued at approximately $23.3 billion.
Under the terms of the agreement, Virgin Media shareholders will receive $17.50 in cash, 0.2582 Liberty Global Series A shares and 0.1928 Liberty Global Series C shares for each Virgin Media share that they hold. Based on Liberty Global’s Series A share price of $69.46 and Series C share price of $64.50 as of February 4, 2013, this implies a price of $47.87 per Virgin Media share, reflecting a 24% premium to Virgin Media’s closing price on February 4, 2013.1
PREVIOUS: Setting the stage for a battle of billionaires John Malone and Rupert Murdoch, Virgin Media has just released a statement regarding yesterday’s news that Malone‘s Liberty Global is prepping a $20B+ bid for the group. The UK’s second largest pay-TV operator confirmed it is “in discussions” with Liberty Global “concerning a possible transaction.” A move by Malone on Virgin and its 4.9M subscribers would pit him against long-time frenemy Murdoch whose …
Liberty Media Chairman John Malone just consolidated his power at the satellite radio company as four people friendly to his outlook joined the Sirius XM board replacing former CEO Mel Karmazin — who left last month — and three other directors who just resigned. Leon Black, Lawrence Gilberti, and Jack Shaw have left, the company reports this morning. The SEC filing notes that this was “not the result of any disagreement with us on any matter relating to our operations, policies or practices.” They’ve been replaced by Liberty SVP Mark Carleton, Liberty VP Robin Pringle, Liberty General Counsel Charles Tanabe and Sirius XM’s new interim CEO James Meyer. Liberty’s picks now occupy eight of the 12 board seats, Liberty’s control of Sirius XM voting shares crossed the 50% ownership threshold on January 18 after it bought an additional 50M shares, at $3.1556 per share, and converted its preferred stock holdings into 1.29B common shares. It now has 50.21% of Sirius XM. Since it meets NASDAQ’s standards for being a “controlled company,” Sirius XM says that it is “exempt from certain corporate governance requirements” including one that requires a majority of the board members to be independent of management. “The controlled company exemption does not extend to the audit committee independence requirements and we have not made any change to our audit committee at this time,” Sirius XM says.
Liberty Media‘s John Malone is famous for constructing Rube Goldberg-like deals that enable him to avoid taxes, or avoid regulator scrutiny. And the just-announced arrangement to spin off Starz will do nothing to change that reputation. When it’s done, Starz will be part of a separate company with two classes of stock that will trade on NASDAQ as STRZA and STRZB. The FTC just endorsed the plan, which Liberty announced in August. The simple way of looking at it is that the Starz shares will be granted as a dividend to investors who own Liberty Media shares as of January 11. But that isn’t precisely accurate. The deal is being structured as though Starz is spinning off Liberty. So the Starz assets will remain with the Liberty Media corporate entity — which will change its name to Starz. What about all of the other assets including Liberty’s interests in the Atlanta Braves, Sirius XM, Live Nation, Barnes & Noble, Time Warner, and Viacom? They’ll go into a new entity that will briefly be called Liberty Spinco; its shares will be distributed to Liberty Media shareholders beginning on Monday and will briefly trade under the symbols LMCAD and LMCBD. That company will then change its name to Liberty Media, and on January 22 will be traded under the company’s current symbols: LMCA and LMCB. Once the split is complete don’t be surprised if you hear …
Here’s the latest sign that two of the media business’ most famous frenemies have put their squabbles behind them, at least for now. IAC chief Barry Diller stepped down as chairman and Senior Executive of the web’s top travel site today after John Malone’s Liberty Interactive — which includes the QVC shopping channel — bought 4.8M of his shares at $62.50 a share. Liberty’s mix of Series B shares (which have 10 votes apiece) and Series A ones (one vote apiece) leave Liberty with 57% of the TripAdvisor votes, but just 22% of the equity. The news resulted in a 9% pop in early trading for the company’s shares, which closed yesterday at $38.39. “My only reason for resigning as Chairman and disposing of my interests is that I have more obligations than time and transferring control of TripAdvisor to Liberty is something I’m very comfortable with — Liberty has proven itself a fine steward and leader of its controlled businesses,” Diller says. He’ll remain a director of TripAdvisor. Liberty CEO Greg Maffei says that his company’s “increased investment” in the travel site will make it “a strong addition to our portfolio.” Malone helped Diller change himself from Hollywood mogul to e-commerce entrepreneur in 1995 by giving the former head of Fox control of Home Shopping Network. But the relationship hit the skids in 2008; Liberty sued Diller saying that his plan to divide IAC into five separate companies diluted Malone’s …
UPDATE, 11:56 AM: Liberty Media chairman John Malone finally took on the big question for Starz as his company prepares to spin it off: In a Q&A session at the end of Liberty’s Investor Day presentations, he indicated that once the premium cable network company is independent it likely will decide to sell itself to another company. “Everybody can use a big brother,” Malone says. “There are substantial synergies for Starz working together with various potential media partners. Certainly one of the opportunities is for [CEO Chris Albrecht] and the board to explore other relationships….Liberty can’t provide Starz with much in the way of operational synergies in the U.S.”
PREVIOUS, 10:52 AM: Starz’s new slogan is “Starz: Taking You Places,” CEO Chris Albrecht told Liberty Media investors today at the company’s annual gathering to review its holdings. Liberty CEO Greg Maffei says execs expect a spinoff to take place by year end.
John Malone’s international cable company, Liberty Global, already holds about 50% of Belgium’s largest cable operator. It is now offering $2.54B to acquire the remainder. In a statement, Liberty said it would pay 35 euros ($45.34) cash per share, a 14% premium. Liberty Global president and CEO Mike Fries said, “We believe this is the right time for Telenet to become a wholly-owned part of Liberty Global’s pan-European platform in its next stage of development… As a long-term, industrial player in European cable, this shows our commitment to the Belgian market.” Liberty Global operates in 13 countries outside the U.S. and has 20M subscribers.The Telenet board said it will review and analyze the offer. Today, Telenet upgraded its full-year 2012 outlook on revenue growth to 7-8% from an initial 5-6%. The company said the optimism was driven by an upswing in multiple-play, digital TV and other subscribers.
John Malone’s Liberty Media has increased its stake in Sirius XM Radio to about 48% from 46.2%, the Wall Street Journal reported tonight. Liberty disclosed in an evening filing that it had bought roughly 90 million Sirius shares recently for about $2.50 each or $225 million in total. That and another transaction involving an additional 41 million shares raise Liberty’s effective stake to 48%. Liberty has asked the FCC for permission to take control of the company, but Serious has opposed the application. If Liberty increases its stake to more than 50% it would have clear control of the company, allowing Liberty to replace Sirius management and possibly take other actions such as spinning off the satellite radio broadcaster to Liberty shareholders.
The satellite radio company CEO didn’t say that directly in a conference call with analysts this morning. But he sure left that impression after he was asked about the effort by Liberty Media Chairman John Malone — Sirius XM‘s biggest shareholder with about 46% of the voting stock — to take control. It’s been widely believed that Karmazin would split if that happened, based in part on comments he made a few years ago about not wanting to work for someone else. Yet he said this morning that his statements about wanting to be No. 1 came in the context of his frustrations trying to run Viacom under Sumner Redstone. Karmazin left the company in 2004. “My experience at Viacom was something I didn’t enjoy,” he said this morning. So what about working for Malone? Karmazin says that “there is no issue involving Mel” that might interfere and “I can assure you that the board and I are interested in accomplishing whatever Liberty wants to do” as long as it serves all shareholders’ interests. Karmazin says that his contract expires at year end and “the board and I will deal with it” before the next quarterly conference call with analysts. As for the status of Liberty’s take-over effort, ”we really have nothing new to report,” the Sirius XM chief says. “Liberty has to decide what they want to do, and maybe they’ve done that already. They have …
Malone controls shares convertible into more than 40% of the satellite radio company stock — but he’s talking like Sirius XM will soon be his based on news coverage of his comments to reporters at Sun Valley. The Liberty Media Chairman said that he’d “prefer not to lose” Mel Karmazin, but the Sirius XM CEO “said he won’t work for me so what am I supposed to do?” Malone didn’t mind taking a few jabs at Karmazin, though. He says that the former Viacom No. 2 exec — who had a famous falling out with Chairman Sumner Redstone — “needs to go back in history, transport himself back in time, mend his fences with Sumner and go be a new person. Relax, enjoy his success, bask in the glory, and enjoy his job. He does a great job. We love him.” Malone scoffed, though, at Karmazin’s claim that he’s underpaid. “It’s a joke. He’s clearly doing it tongue-and-cheek. He has an enormous equity incentive.” Malone is asking the FCC to give Liberty de facto control over Sirius XM’s broadcast licenses. So it’s interesting that he says he had dinner last night with FCC Chairman Julius Genachowski, although the Liberty chief declined to say what they discussed. If Liberty persuades regulators to recognize Liberty’s de facto control, then “there is no barrier to us having actual hard control.” What then? “There’s no question that eventually Sirius …
The only thing riskier than being an enemy of Liberty Media’s John Malone is to be his friend — as Sirius XM’s Mel Karmazin is discovering. They developed a corporate bromance in 2009 when Malone rescued the satellite radio company as it struggled to keep up with its debt payments: Liberty invested $530M, and received preferred stock convertible into 40% of Sirius’ voting shares. But Sirius has just disclosed that Malone quietly asked the FCC this month to give his company — in Liberty’s words — “de facto control of Sirius XM Radio Inc.’s earth station licenses.” It seems that Malone, one of the media industry’s toughest negotiators, believes Liberty is entitled to take charge with the March 6 expiration of some conditions in the 2009 agreement that limited its ability to buy additional Sirius shares. Liberty’s filing set off alarm bells in Karmazin’s shop. Late Friday, Sirius asked the FCC to dismiss or deny Liberty’s petition. The satellite company says that Liberty’s application has technical problems that should disqualify it — and it’s about corporate governance, not a matter for the FCC. But just in case the FCC wants to take on the matter, Sirius says that Liberty is wrong about the investment agreement. It only entitles Malone to pick five of the 13 board members, not a majority. And although conditions barring Liberty from buying additional shares have expired, it hasn’t bought them yet. “Liberty Media now can seek to control the management, …
The satellite radio company’s shares are up 11.4% since early Thursday while other NASDAQ stocks collectively are down 4.4%. What’s going on? Well, it seems that many analysts who attended Liberty Media’s annual dog-and-pony show for them on Thursday came away convinced that Sirius XM is preparing to see John Malone lift his company’s 40% stake well past 50%. He has to wait until March to avoid taking a tax hit on such a move — and we all know how much Malone hates to pay taxes. After that there’d be a tax advantage: Sirius has $8B in net operating losses that could be used to shelter future payments. That’s great now, although the losses “sucked” when the company was racking them up, CEO Mel Karmazin told Liberty investors at last week’s gathering. So, is Liberty interested in buying Sirius? A lot of comments that Liberty CEO Greg Maffei made last week sure make it sound that way. “There are few businesses that I have as much confidence in,” he said. ”Boy, it’s got a heck of a tail wind behind it. Find me another business” with as much opportunity. Sirius’ first consumer rate hike, coming in January, ”is a great opportunity and there’s a potential for more…(Profit) margins will expand….It’s our kind of business.” He added that his company
This will give Liberty Media Chairman John Malone and other executives a lot to talk about later this morning at the company’s annual dog-and-pony show for investors. The decision to convert Liberty Starz and Liberty Capital from tracking stocks into a single asset-based stock should diminish the growing sense that Malone was fattening up Starz for a big deal — possibly a sale. The channel has been investing heavily in original programming, and Liberty Starz just unveiled a $1.5B credit facility. Janney Capital Markets analyst Tony Wible says that the Street “likely will be mixed in how it interprets the news” of the change in Liberty Starz’ status. Meanwhile, Liberty’s $1.25B stock repurchase “should help ease (investors’) concern.” And hope springs eternal: Miller Tabak analyst David Joyce says that “in time we would expect M&A activity with these assets to pick up again.”
Here’s the company’s release:
ENGLEWOOD, Colo. — Liberty Media Corporation (Nasdaq: LCAPA, LCAPB, LSTZA, LSTZB) (“Liberty”) today announced that its board of directors has unanimously voted to eliminate Liberty’s tracking stock structure by converting each share of its Liberty Starz common stock into 0.88129 of a share of the corresponding series of Liberty Capital common stock, effective at 5:00 p.m., New York City time, on November 28, 2011 (the “Conversion Date”). Cash will be paid in lieu of fractional shares.
Analysts attending Liberty Media’s annual investor day on Thursday will be listening carefully when Starz CEO Chris Albrecht discusses his channel’s plans. His boss, Liberty Chairman John Malone, loves to buy, sell, and swap assets — as long as he can do so without paying a big tax bill. And there’s a growing belief that Malone is positioning Starz for a deal as the company focuses its branding efforts around more than 50 hours of original programs — including Boss, Magic City, Spartacus, and Da Vinci’s Demons — instead of theatrical films from Disney and Sony. For example, BTIG analyst Rich Greenfield says in a blog post today that “a transaction may…be coming to turn Starz into an asset based security” instead of just part of the Liberty Starz tracking stock. Janney Capital Markets’ Tony Wible says that Starz’ “strategic benefits could make it an M&A target.” Maxim Group’s John Tinker agrees that Starz “should be merged into a larger entity.”
Albrecht reinforced those views recently by talking up his desire to have the channel stand out as a premium service. On Friday he elaborated at the Monaco Media Forum on points he made earlier in the week on the Liberty earnings call: The channel scrapped its effort to negotiate a new streaming deal with Netflix because it didn’t set Starz apart from the video pack.
UPDATE, 12: 00 PM: No word from Starz execs about when they might announce a digital streaming deal to replace the one with Netflix, which expires in February. “There are a lot of conversations going on,” Starz CEO Chris Albrecht told analysts today. “It’s a road that needs to be evaluated almost on a weekly basis.” The company hopes to license programs from its premium channel to a premium-priced streaming service – meaning, one that charges more than Netflix. As more companies enter the online video market “they’ll begin to segment and differentiate,” says Liberty Media CEO Greg Maffei. “That’s something we would embrace.” Albrecht said that “we didn’t believe it was appropriate to have our products included in a low-cost service.” Do they really expect lots of consumers to pay high prices in this weak economy — especially with the anemic numbers cable and satellite companies are posting for premium channels? At Starz the 3Q sub figure was
Ted Turner seems destined to be one-upped by his longtime ally, Liberty Media’s John Malone. First it was in media, where Malone remains a player long after Turner was pushed out of Time Warner. Now Malone has passed Turner as the nation’s biggest private land owner — a title the founder of cable channels including CNN, TNT, and Cartoon Network held since the 1990s — according to The Land Report. Malone bought more than 1M acres of timberland in Maine and New Hampshire this year, bringing his total land holdings to 2.2M acres. That passes Turner, who has more than 2M acres, mostly in Montana. Malone tells the publication that he caught “this land-buying disease” when he toured Turner’s ranch two years ago. The Land Report’s annual survey of the largest private U.S. landowners just looks at acreage owned by individuals, families, family-owned companies, and family-controlled foundations.