Liberty to Spin Off $9 Bln in Businesses
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By Derek Caney
NEW YORK (Reuters) - Liberty Media Corp. (NYSE:L - news) on Monday said it would spin off its international businesses with an estimated value of nearly $9 billion as part of its effort to simplify the company's structure.
The company said the spin-off is intended to be tax free to shareholders and will create a new publicly traded company called Liberty Media International Inc.
Cable pioneer John Malone, chairman of the Englewood, Colorado, media conglomerate, has long held ambitions to create an international equivalent to the Tele-Communications cable television empire he built before selling it to AT&T in the 1990s. Malone has a 28 percent voting stake in Liberty Media.
Company executives have said that the market undervalued its international assets, which include stakes in UnitedGlobalCom Inc. (NasdaqNM:UCOMA - news), an operator of cable systems in Europe and Latin America; Jupiter Telecommunications Co., a Japanese cable operator; Liberty Cablevision of Puerto Rico Inc.: and Pramer, which owns cable networks in Argentina.
"This move for investment clarity could be the restructuring catalyst the market has been waiting for," Guzman & Co. analyst David Joyce said in a research note, estimating the combined assets would be worth $8.76 billion.
He added that the spin-off would highlight the positives in Liberty's remaining assets, which include Starz Encore cable channel, QVC and stakes in Discovery Communications.
Liberty shares rose 6 cents to $11.78 in early trading on the New York Stock Exchange (news - web sites).
Credit rating agency Fitch Ratings said the spin-off would "alleviate negative pressure on Liberty's credit profile by removing riskier, highly leveraged assets with weak cash flow from Liberty's asset portfolio." It affirmed Liberty senior unsecured debt rating at BBB-, one notch above a junk rating.
The spin-off would also likely reduce Liberty's long-term debt load, which stood at $9.48 billion at the end of 2003. The company's debt rose sharply after it bought Comcast's 57 percent stake in QVC. The company has pledged to cut its debt by $4.5 billion over the next two years.
Late last year, the company reorganized itself into four groups: its interactive business, which includes QVC; its networks, including Starz Encore and its Discovery stake; a corporate stake that includes its stakes in Time Warner, Sprint and Viacom; and its international unit.
Liberty Media has been criticized in the investment community for its complicated ownership structure. It has also been under pressure to take on larger stakes in operating entities to avoid being regulated as a mutual fund.
It reported a fourth-quarter loss of $931 million, or 32 cents a share, compared with a year-earlier loss of $692 million, or 26 cents a share, as a result of a write-down of the value of some of its assets, including the Starz Encore cable networks unit.
Revenue, however, quadrupled to $2.12 billion from $536 million a year earlier as a result of its acquisition of Comcast Corp.'s 57 percent stake in the QVC cable shopping channel.
The QVC unit saw its operating income fall 7.7 percent to $229 million, reflecting thinner margins. Revenue rose 14 percent. The unit expects 2004 revenue and operating cash flow to rise in the high single digit percentage range, but it expects operating income to fall in the high teen percentage range.
Starz Encore posted an operating loss of $2 million, compared with a profit of $84 million a year earlier, reflecting the higher cost of programing and marketing costs associated with "The Lord Of The Rings." Revenue rose 3 percent to $235 million.
The unit expects revenue to rise 3.7 percent to 6.5 percent this year, but expects operating cash flow and income to fall by as much as one-half.
Separately, UnitedGlobalCom, in which Liberty owns a 74 percent stake, said it would buy French cable operator Noos from Suez (LYOE.PA) in a deal valued between 508 million and 660 million euros ($624 million to $811 million). |
