Liberty Media posts higher Q4 profit

QVC, Starz propel Q4 revenue; sets $1 bil buyback

NEW YORK -- John Malone's Liberty Media Corp. reported improved fourth-quarter results for its key businesses Wednesday and said that it will buy back up to $1 billion of shares of its Liberty Capital tracking stock in a tender offer, helping boost that stock to a new high.

CEO Greg Maffei predicted Liberty should get its hands on a controlling stake of about 40% in satellite TV giant DirecTV Group in a deal with News Corp. in around July. He also said Liberty will watch the regulatory review of the proposed satellite radio merger closely. "We will watch XM-Sirius with interest" to gauge if a DirecTV combination with competitor EchoStar Communications may be possible down the line, he said.

Maffei said though that for now, DirecTV and EchoStar are trying to capture synergies in the absence of a merger in broad-based discussions focusing on such issues as how to offer broadband services. "We clearly see the synergies as large enough," he added.

If there ever is a merger in the future, Maffei said Liberty would have a problem as a seller of DirecTV as it must hold the asset for several years to benefit from the tax-efficient deal structure with News Corp.

Maffei also said Liberty believes that "a lot of the old media assets remain very attractive" and undervalued, but private-equity groups have more financial power to win deals in today's market. That said, Liberty has a chance to score deals where cost, cross-promotional and other synergies are possible with a takeover target, he added.

He said: "2006 was a productive year at Liberty, and we made progress toward simplifying our portfolio of assets." Given the "transformational year" toward more of an operating company structure and strong cash flow, the company said it will launch a $1 billion Dutch auction tender offer for Liberty Capital shares at prices of $105-$113 a share. The prices amount to premiums of 1.2%-9% over Tuesday's closing stock price.

Liberty Interactive Group posted an 11% revenue increase for the fourth quarter and a 21% operating cash flow gain.

Revenue at home shopping channel QVC, the group's key asset, rose 7.3% to $2.2 billion, driven by international sales, which jumped 10% excluding the impact of currency exchange rates, compared with a 4% gain in the U.S.

At Liberty Capital, the core Starz operation reported operating income of $46 million in the fourth quarter, compared with a loss of $2 million in a year ago period. Revenue increased 4% to $257 million. Operating cash flow rose 72% year-over-year to $50 million.

Maffei said Wednesday that both stocks have further upside potential, arguing that Liberty Capital in particular still is trading at a discount to its real value. A full-fledged spinoff of Liberty Interactive from Liberty Capital is "not our intention today," he said.

Liberty Capital shares closed up 4% on Wednesday at $107.88 after going as high as $109.60 in intraday trading. That set a high for the stock since its separation from Liberty Interactive in May.
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