* Liberty merges DirecTV with other assets into new unit
* New unit to be led by DirecTV CEO Chase Carey
* John Malone's voting stake falls to 24 percent
* Analysts say less likely for DirecTV to be sold
* Liberty shares up 3.62 pct; DirecTV down 2.6 pct
(Adds analyst and executive quotes, updates shares)
By Yinka Adegoke
NEW YORK, May 4 Liberty Media Corp <LINTA.O
said on Monday it plans to combine the No. 1 U.S. satellite TV
service DirecTV Group Inc DTV.O with its other media assets
to form a new company.
Liberty, controlled by cable pioneer John Malone, plans to
combine DirecTV with assets held by Liberty Entertainment
LMDIA.O including Game Show Network, FUN Technologies and
three regional sports networks. Liberty owns a 54 percent
economic stake in DirecTV.
The new company will retain the DirecTV name and still be
led by current Chief Executive Chase Carey, with Malone
remaining as chairman of an unchanged board. But Malone's
voting stake will fall to 24 percent, from the 48 percent that
Liberty Media currently has.
Holders of Liberty Entertainment shares will receive 1.1111
shares of DirecTV Class A for each share. That translates to
DirecTV paying a premium of around $350 million.
"At current prices, it's a better deal for Liberty Media
than it is for DirecTV," said Thomas Eagan, analyst at Collins
Eagan said investors will view the fact that DirecTV bought
Liberty Entertainment rather than the other way round as a
positive in Liberty Media's favor. "John (Malone) not wanting
to buy DirecTV got DirecTV to buy him," said Eagan.
Shares in Liberty Media rose 3.62 percent to $25.21 in
early afternoon trading, while DirecTV shares were down 2.6
percent to $23.93.
Carey said the move meant DirecTV will now be controlled by
its own shareholders for the first time and that Malone's
interests will be more closely aligned with those of other
"At 24 percent, it's a very different position from a 48
percent controlling position. It's obviously a very large voice
but it's not control," Carey said in an interview.
Analysts said the move made it less likely that DirecTV
would be sold to AT&T Inc (T.N) or any other buyer.
"While DirecTV gains strategic control, and the random
assets it's getting could be sold, we'd view an acquisition by
AT&T as less likely in the near term," said Gregory Lundberg,
analyst at Communications Equity Research in a client note.
Liberty acquired its stake in DirecTV in February 2008 in
exchange for a stake it held in News Corp (NWSA.O), which
previously controlled DirecTV.
Since that exchange News Corp's shares have fallen more
than 50 percent while DirecTV has outperformed most media
stocks with a fall of just 11 percent.
The move to split off DirecTV, which was expected by Wall
Street, helps to resolve a long-standing discount between the
market value of the Liberty Entertainment tracking stock
LMDIA.O and the assets it owned including DirecTV.
Liberty Entertainment's 54 percent stake in DirecTV was
worth more than Liberty Entertainment's total market
capitalization, allowing many investors to devise arbitrage
trading strategies to own DirecTV via the tracking stock.
"This transaction clarifies DirecTV's capital structure,
reduces its shares outstanding, eliminates stock overhang and
arbitrage issues, and provides DirecTV with strategic content
businesses," Liberty Media Chief Executive Greg Maffei said in
Each shareholder of Liberty Entertainment tracking stock
will receive 0.9 of a share of Liberty Entertainment and retain
0.1 of a share of new Liberty Starz tracking stock, which
covers its Starz TV assets.
Liberty Starz will consist of Starz Entertainment, 37
percent of satellite broadband operator WildBlue, $650 million
in cash and other assets. It is expected to trade under the
LSTZA and LSTZB symbols on Nasdaq.
Liberty took a controlling stake in satellite radio company
Sirius XM Radio Inc (SIRI.O) earlier this year and analysts
have speculated that Liberty could combine it financially or
strategically with DirecTV's satellite assets.
Maffei told analysts on a conference call there were
strategic opportunities to work with Sirius in the future.
"There could be some synergy around marketing and bundling,
there could be some programming initiatives, and if you want to
dream the glorious dream you could think somehow about
cooperation around mobile video down the road," he said.
(Reporting by Yinka Adegoke; Editing by Derek Caney, Tim
Dobbyn, Leslie Gevirtz)