This would be John Malone’s most ambitious effort to become a media power in the UK, the Financial Times says — noting that “several people familiar with the situation” believe a bid “could be announced in the coming days.” The paper also says that a move on the cable company, which had nearly 4.9M video subscribers at the end of September, could pit Malone against his long-time frenemy Rupert Murdoch. News Corp owns 39.1% of satellite broadcaster BSkyB. Malone has long been interested in Virgin. In 2007 he said that his company was “doing our homework” to compete in an auction if it took place. The previous year he and Murdoch ended a two year battle that began when Liberty quietly bought a 16.3% stake in News Corp. Murdoch won back the shares by giving Malone a 38.5% stake in DirecTV, as well as $550M and three regional sports networks. Malone’s Liberty Global now has 19.6M cable customers in 13 countries, including 11 in Europe.
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 …
Shares appreciated 9% to $15.69 in the first week after Liberty Media spun Starz off as an independent company. But its debut was also greeted by analyst reports that raised concerns about its prospects. Barclays Equity Research’s Chris Merwin initiated coverage today with an “equal weight” rating, and $15 price target. He fears that the premium pay TV network company won’t find a buyer or partner soon, and could soon see its profit margins shrink. Outlays for original programming will rise: Starz could have as much as 60 hours of originals in 2014, up from 38 hours this year — potentially raising next year’s production costs by 20% to $241M — the analyst says. In addition, execs soon will have to start negotiating to extend Starz’ movie carriage deal with Sony, which expires at the end of 2016. That could be costly. Starz needs Sony more than ever now that Disney has said it will move its films to Netflix beginning in 2016. And Merwin predicts that “other bidders, particularly Netflix and Amazon, could make competitive offers” for the studio’s films.
The stock is up more than 2% in early trading with investors more surprised at the timing of the announcement than by the decision itself. The satellite radio company says it will repurchase $2B in stock, with no timetable. Liberty Media, which owns 49.8% of Sirius XM, will participate in a way that ensures the effort doesn’t boost or dilute its stake. In addition, on December 28 Sirius XM will pay a 5 cent-a-share special dividend — about $325M — to those who own the stock on December 18. The general feeling was that Sirius XM would return cash to shareholders soon, but not yet: It’s still negotiating to determine the royalty rates it will have to pay for the music it airs, and looking at candidates to replace CEO Mel Karmazin when he leaves in February. The FCC could formally rule by year end that Liberty owns Sirius XM and its satellite licenses. But a lot of companies, including Disney and Dish Network, are announcing dividends ahead of the end of the year: If lawmakers can’t avoid the so-called fiscal cliff tax and budget measures that take effect in January, then dividends will be taxed at a much higher rate.
That’s one of several questions swirling in financial circles about Netflix’s new agreement to license the pay TV rights to Disney movies beginning in 2016. But there’s wide agreement that the outlook for Starz just became a little dimmer. The Disney movies it currently licenses constitute some of its most popular programming. “Approximately half of its content output comes from [Disney],” ISI Media’s Vijay Jayant says. “The Starz originals are not yet in a position to make up for the loss of [Disney] content, and we suspect that it will drive a further deceleration of the Starz business fundamentals.” That worrisome news comes at a sensitive time for Starz: Its parent, John Malone’s Liberty Media, is about to spin the premium TV channel off into a separate, publicly traded company. Malone hinted that it might become takeover bait, saying that “everybody can use a big brother.” Lazard Capital Markets’ Barton Crockett just cut his price target for Liberty by $8 to $134 noting that the Netflix-Disney pact raises “more questions about the long-term viability of Starz.”
Investors share the analysts’ concerns: Liberty Media stock fell 4.9% following the disclosure of Disney’s deal with Netflix. The Street also believes that the agreement is great for Netflix: Its shares popped 14%. (Disney was merely +0.02%.)
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.
The Sirius XM CEO isn’t sure that John Malone’s Liberty Media will want him to stay after it owns more than 50% of the satellite radio company’s stock — something that could happen as early as today. “My instincts are that Liberty does not need me,” Mel Karmazin said at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference. “I have historically been expensive…That’s OK with Mel.” But he also says that he’s “open to having a conversation” about staying after. For example, if Liberty decides to spin off Sirius XM then “that would be a situation I might be interested in.” Karmazin says there’s been “no dialogue whatsoever about me coming or going,” including with Sirius XM’s existing board. His current contract expires in December. If he signed a new deal while the company’s future is in flux then “it would look [to shareolders] like I sold out.”
A Florida police pension fund is suing Sirius XM Radio Inc’s board of directors for allowing John Malone’s Liberty Media Corp take over the satcaster without a fight and without paying a premium. Reuters reports the City of Miami Police Relief and Pension Fund filed suit in Delaware Chancery Court following Liberty informing the FCC on Friday that Liberty planned to take full control of Sirius XM by increasing its stake to more than 50%. Provisions under which Liberty invested in Sirius XM in 2009 prohibit the company from fighting off a Liberty takeover, and the police pension fund says this constituts a breach of the board’s fiduciary duties. As part of its investment, Liberty loaned Sirius XM $530 million to help the satcaster avoid bankruptcy. Terms of the loan stipulated that Sirius’ board agreed not to adopt a poison pill or any defense measures against a Liberty takeover after a three-year standstill, which expired in March. Since then Liberty has been buying Sirius shares in the open market to boost its stake above 50%.
The change will turn Starz into a separate, publicly traded company. That should “provide better transparency on the Starz operating business” and “optimize the Starz capital structure,” Liberty Media CEO Greg Maffei says this morning. In addition, it could become easier for Liberty and Starz to use their shares for acquisitions — even as it preserves for Liberty “all our options with respect to Sirius XM and Live Nation,” companies in which it has substantial investments. Liberty investors will receive shares of Starz as a dividend. The new company will include all of Starz’ assets as well as $1.5B in debt and “an undetermined amount of cash.” The transaction, expected to close late this year, is designed to be tax free — a key consideration in deals by Liberty Chairman John Malone — but is contingent on a letter from the IRS verifying that fact. Although it will need the usual approval by anti-trust officials, it will not require a stock holder vote.
Jean-Bernard Levy joined Vivendi in 2002 and became chief executive in 2005. Since then, he’s run a conglomerate that owns the world’s biggest music company in Universal Music Group, European TV giant Canal Plus, and 61% of video game …
A New York jury awarded Liberty Media more than $956M, finding that Vivendi Universal misled John Malone’s company about the value of Vivendi shares in 2002 when it bought Liberty’s stake in USA Networks. Liberty …