Liberty Media Corp. plans to split off its stake in DirecTV Group Inc., a move that may make it easier for chairman John Malone to acquire the rest of the largest U.S. satellite- TV provider.
The new company, Liberty Entertainment Inc., will include almost 50 percent of DirecTV plus all of cable network Starz Entertainment and Liberty Sports Holdings LLC, Englewood-based Liberty Media said Wednesday in a statement. The sports unit owns three regional cable networks.
Malone could use Liberty Entertainment as a platform to blend DirecTV’s distribution with cable and satellite channels, said Chris Marangi, associate manager of the Gabelli Value Fund in Rye, N.Y. Malone obtained his DirecTV stake in a share swap with Rupert Murdoch’s News Corp.
“It facilitates an eventual combination of Liberty Entertainment and DirecTV,” Marangi said, adding that Malone will save money on taxes if he spins off the entertainment unit before pursuing DirecTV.
Liberty spokeswoman Courtnee Ulrich had no comment. DirecTV spokesman Darris Gringeri declined to comment.
Liberty Entertainment’s tracking stock rose 41 cents to $27.53 in Nasdaq trading. DirecTV fell 8 cents to $27.54 but is up 19 percent this year.
Liberty Entertainment shares were 17 percent cheaper than the value of the DirecTV stock and other assets it tracks, based on closing prices Tuesday. That so-called tracking-stock discount may narrow after Liberty Entertainment becomes an independent company whose finances aren’t controlled by Liberty Media, Collins Stewart analyst Thomas Eagan said in a report Wednesday.
Malone’s intent, price
Malone may try to exploit his large position in DirecTV to float a takeover bid that offers shareholders in the satellite provider only a small premium, said Sanford C. Bernstein & Co. analyst Craig Moffett in New York.
“What matters is not simply Malone’s intent, but price,” said Moffett, who said DirecTV shares will track the market and doesn’t own them. “It may not be good for shareholders.”
Malone may later try to flip the company to AT&T, Eagan wrote.
Malone started the Entertainment tracking stock in March as part of a strategy to boost the value of Liberty Media’s assets by letting investors bet separately on its retailing businesses, including the QVC home- shopping channel, and its minority investments in companies such as Time Warner Inc., as well as the entertainment properties.
Liberty Entertainment has risen 10 percent since March, almost twice as much as DirecTV.
That came the month after Malone swapped his 16 percent stake in News Corp. for a 40 percent stake in DirecTV.
Murdoch made the deal, which valued the assets he gave up at more than $1 billion above what he got in exchange, after Malone threatened to seek a larger role in controlling News Corp.
