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Opportunity Knocks With Liberty Media
By Brett Messing
Special to TheStreet.com
8/9/01 11:31 AM ET
With this column, we introduce Brett Messing, a partner at Oscar Capital Management in Los Angeles, a
firm that manages $1 billion in assets. Prior to that he was at Merrill Lynch managing a team that
invested more than $3 billion in assets. He started out at Goldman Sachs, where he worked in the private
client services division and went on to lead the restricted equities group. As always, please let us know
what you think.
John Malone is perhaps the most brilliant dealmaker in the world. He is also ticked off and ready to kick
some butt.
He has been ignored by Michael
Armstrong, who did not seek his counsel
on Comcast's (CMCSK:Nasdaq - news -
commentary) informal bid for AT&T
Broadband. He has watched his
personal stake in AT&T (T:NYSE - news -
commentary) decline by $1 billion. He
was embarrassed by the bankruptcy of
ICG Communications, nine months after
his $500 million investment in the
company.
John Malone wants revenge. He is a man
on a mission, and you can be his partner
for free.
Liberty Media (LMG^A:NYSE - news -
commentary) is John Malone's company.
Like Warren Buffett's Berkshire Hathaway (BRK^A:NYSE - news - commentary), it is basically an
investment holding company. Here's the best part: Liberty Media's stock is trading at a 25% discount to
the value of its holdings.
Liberty Media's public stock holdings include AOL Time Warner (AOL:NYSE - news - commentary),
Gemstar-TV Guide International (GMST:Nasdaq - news - commentary), IDT (IDT:NYSE - news -
commentary), Motorola (MOT:NYSE - news - commentary), News Corp. (NWS:NYSE - news -
commentary), Sprint PCS (FON:NYSE - news - commentary), USA Networks (USA:NYSE - news -
commentary), UnitedGlobalCom (UCOMA:Nasdaq - news - commentary) and Viacom (VIA:NYSE -
news - commentary).
Liberty Media also has significant stakes in a number of private companies, including Discovery
Communications, QVC, Starz Encore and Telemundo.
There are several ways to win with Liberty Media stock. First, I anticipate a
bounce in the company's portfolio of media and communication stocks. As
Steve Case's acquisition of Time Warner signaled the top of the stock
market last year, I believe that the Roberts family's attempt to acquire
AT&T Broadband is a strong indication that media asset values are cheap.
Second, I expect a narrowing or elimination of the discount to the net asset
value of Liberty Media's holdings. Berkshire Hathaway trades at a Buffett
premium. Liberty Media should not trade at a Malone discount. While John Malone may have had a down
year, he is a first-ballot Hall of Famer. Malone is going to do something big again.
Malone is focusing the preponderance of his energy and capital on European opportunities. He has asked
a number of his top lieutenants to move to Munich and is acquiring significant television and cable
systems in Germany. It seems he is taking his domestic playbook and putting it to work in Europe. The
Europeans do not stand a chance against his acquisition assault. Malone has a strong asset base, cash,
tax loss carry-forwards, a public vehicle and a target-rich environment filled with depressed and distressed
media and communication assets.
As a financial buyer, I look for cheap assets and free options. With Liberty Media stock, there is a unique
opportunity to purchase assets at 75% of their depressed value while getting a free ride on John Malone.
Malone fans should also take a look at Liberty Media portfolio company IDT, which is run by Malone pal
and protege, Howard Jonas. The Fortune 500 telecom company founded Net2Phone and sold a 30%
stake to AT&T in April 2000 for $1 billion. IDT trades at about 60% of the cash on its balance sheet. We
must be in a bear market because opportunities like this only come along at such times.
Brilliant guys for free. |
