Pay-TV providers in Puerto Rico may be the reason Douglas County- based Liberty Media Corp. hasn’t closed a deal to acquire DirecTV from News Corp.
Nearly a year ago — Dec. 22, 2006 — News Corp. agreed to fork over its 38.5 percent interest in the nation’s largest satellite-TV company, DirecTV, three regional sports networks and $550 million in exchange for Liberty’s 17 percent stake in News Corp.
While the deal has been approved by shareholders of both companies, it is hung up at the U.S. Department of Justice.
DirecTV offers service in the U.S. commonwealth of Puerto Rico and competes against a cable offering from Liberty Global, a separate company chaired by John Malone, who controls about 24 percent of the voting shares. Malone is also chairman of Liberty Media and controls about 30 percent of its shares.
Sources say attorneys for Liberty Media and the Justice Department are wrangling over whether Malone’s major interest in both companies would stifle competition and cause pay-TV rates to rise in Puerto Rico, which is governed by U.S. law.
Liberty Global was formed in 2005, a result of a spinout of Liberty’s international holdings and its acquisition of UnitedGlobalCom. Headed by Michael Fries, Liberty Global has its own stock and operates independently of Liberty Media.
Liberty Global operates Cablevision of Puerto Rico and has about 89,000 subscribers. DirecTV has an 86 percent interest in DirecTV Latin America.
“The deal has yet to close. It will close,” Liberty spokesman John Orr said. “It’s not unprecedented (for a deal to take a year to close). It’s just a matter of getting issues finally and completely resolved.”
Liberty has offered a few proposals on how to resolve the quagmire, Janco Partners senior research analyst April Horace said.
“I think there’s a number of different ways they can get around it,” she said. “Maybe Liberty Global can find a buyer at a good price. It’s a separate company, and I don’t think they (Liberty Media) would let this kind of issue kill the deal.”
It’s unclear whether Liberty Global would sell its interest in Puerto Rico.
But according to a report in trade publication Multichannel News this week, Liberty attorneys are stressing the separation of the two companies, saying, “The Justice Department shouldn’t be allowed to force Liberty Global to divest the cable company in Puerto Rico when Liberty Global is not a party to the Liberty Media-DirecTV- News Corp. transaction.”
Orr would not comment on issues holding up the deal or on Puerto Rico but said the delay does not have a “material effect” on Liberty Media.
However, an incomplete deal delays the formation of a new Liberty Media tracking stock, Liberty Entertainment.
“Someone has to do something because millions are being lost on a weekly basis. It’s a deal that should have closed six months ago,” said Jimmy Schaeffler, senior multichannel analyst for the Carmel Group. “They’re losing money on not being able to invest in DirecTV, putting their own ideas in. The (DOJ) is being penny-wise and pound- foolish.”
Kimberly S. Johnson: 303-954-1088 or kjohnson@denverpost.com
Liberty Entertainment
The entity is to be formed when Liberty Global’s deal with News Corp. closes. It will include:
• DirecTV
• Three regional sports networks
• Starz
• Fun Technologies, an online video-game company
• Game Show Network
• The company’s 32 percent interest in Greenwood Village-based Wildblue, a provider of wireless broadband services in rural areas
