Liberty Media Corp. created a new stock category Wednesday that will include DirecTV, which it is buying, and some of its other pay-TV holdings.
The move is part of a continuing effort by Liberty to make its holdings more attractive to shareholders, as the company turns its passive financial investments into tangible, operating companies.
The Douglas County-based company said it would launch the new tracking stock, called Liberty Entertainment, after it completes the purchase of satellite provider DirecTV from News Corp. this year.
Liberty is swapping stock it owns in News Corp. for a 38 percent controlling stake in DirecTV Group Inc., three regional sports networks and $588 million in cash.
A tracking stock is designed to allow shareholders to invest in a certain segment of a company’s holdings. Liberty has two other tracking stocks, Liberty Capital and Liberty Interactive.
Liberty Entertainment will include the former News Corp. assets; Starz LLC; Fun Technologies, an online video-game company; the Game Show Network; and the company’s 32 percent interest in Greenwood Village- based Wildblue, a provider of wireless broadband services in rural areas.
Despite the desire to lump all of its pay-TV distribution methods and associated content together, Liberty’s home shopping network QVC will remain the cornerstone of Liberty Interactive. Liberty Capital’s major assets will include the Atlanta Braves, once purchase of the team is complete, and holdings in Sprint Nextel, Motorola and Sling Media.
“We believe this new Liberty Entertainment group equity should increase shareholder value and … will increase our strategic flexibility,” Liberty chief executive Greg Maffei said in a statement.
The move to a third tracking stock isn’t surprising, given Liberty chairman John Malone’s financial prowess and proclivity to avoid expensive tax penalties, said April Horace, equity-research analyst for Janco Partners. Under rules associated with tax-sharing agreements, net operating losses incurred under one tracking stock can be offset by another.
“I’m pleased with the concept of combining distribution assets with content assets,” Horace said. “There’s more clarity and visibility. Having separate tracking stocks gives (Liberty) financial flexibility if they want to increase or decrease their ownership of DirecTV.”
Liberty also reported earnings for the quarter ended June 30. Net income was $1 billion, up from $478 million in the second quarter of 2006. Revenue totaled $2.2 billion, up from $2 billion in the year-ago quarter.
The Associated Press contributed to this report.
Staff writer Kimberly S. Johnson can be reached at 303-954-1088 or kjohnson@denverpost.com.
Breaking down Liberty
Major assets of Liberty Media’s tracking stocks, with its ownership percentage:
Liberty Capital
Liberty Interactive
Liberty Entertainment
Source: Liberty Media Corp.
