Liberty Media to Combine Liberty Starz, Liberty Capital Tracking Stocks

John Malone
Matthew Staver/Bloomberg via Getty Images

UPDATED: Instead of a full spin-off of Starz that some have hoped for, John Malone's company made the announcement ahead of its investor day, saying the move will reduce a stock discount and create acquisition opportunities.

NEW YORK - John Malone's Liberty Media said Thursday that it will eliminate its Liberty Starz and Liberty Capital tracking stocks and create a single stock for investors to strengthen its stock performance and create new acquisition opportunities.

To combine the tracking stocks, Liberty Starz common stock, which focuses around the Starz premium TV business led by CEO Chris Albrecht, will be converted into 0.88129 of a share of Liberty Capital common stock, effective late on Nov. 28, it said. Liberty Capital is the home of such Liberty investments as satellite radio firm Sirius XM Radio and live event producer Live Nation.

The move seems to go against the hope of some on Wall Street that the company could focus on fully spinning off Starz and position it for a potential sale over the near term.

"We are pleased to announce the combination of Liberty Starz and Liberty Capital into an asset-backed security," said Liberty Media president and CEO Greg Maffei. "The board of directors determined this was the right move to increase the value for both Liberty Capital and Liberty Starz shareholders by eliminating the ‘tracker discount', increasing liquidity in the stock and creating a stronger acquisition currency."

In addition, Liberty said it recently took advantage of the attractive debt markets to raise $1.5 billion in capital at Starz. "We have more opportunities to deploy it at a combined Liberty Media," said Maffei.

As word got out on Wall Street about the Starz debt facility, analysts have in recent days suggested that some sort of Malone restructuring could be in the works. Thomas Eagan of Collins Stewart said Liberty Starz could be combined into Liberty Capital followed at some point by a possible separation of Liberty's stake in Sirius XM Radio. Others, like BTIG's Richard Greenfield, had been hoping for a spin-off of Starz and a potential sale to a bigger media company.

But some say deal speculation is likely to return over time given Malone's and Maffei's reputation for expertly structured deals.

"Last week, Liberty Starz moved to raise a new credit facility, which fanned speculation that Liberty Starz could become more attractive as a standalone takeover candidate," Miller Tabak analyst David Joyce said in a first reaction. "While today’s combination action takes away some of that speculation, in time we would expect M&A activity with these assets to pick up again."

Janney Montgomery Scott analyst Tony Wible said that Liberty's announcement of an increase in its stock buyback program to $1.25 billion can be seen as balancing out any disappointment about Thursday's news of the combination of the tracking stocks. "The Street will likely be mixed in how it interprets the news," he said. "The company is, however, announcing that it is authorizing a $1.25 billion buyback that should help ease concern."

Tracking stocks, which are supposed to allow investors to focus investments on a certain part of a broader business and thereby highlight that part's value, have a history of mixed success on Wall Street.


Twitter: @georgszalai