Malone takes charge of cable properties --
June 07, 2004
Malone takes reins of spinoff
Liberty Media International gives him another crack at a global cable company.
By Aldo Svaldi
Denver Post Staff Writer
Cable king John Malone today gets a rare shot to try to outdo an earlier success.
The man who engineered the growth of one-time behemoth Tele-Communications Inc. assumes operational control of Colorado's newest public company, Liberty Media International.
The company is the former international division of Liberty Media Corp., Malone's primary programming and investment vehicle. Worth about $7 billion out of the gate, Liberty Media International has a slightly larger stock market value than Qwest, counts 11,000 employees through its numerous affiliates and reaches hundreds of thousands of homes from the southern tip of Chile to the northern tip of Japan.
And Malone, who controls 34 percent of the voting power of the new firm, will contribute sweat equity as chairman, chief executive and president.
"That tells you he will be hands on, and he perceives a nice opportunity here," said Matthew Harrigan, an equity analyst at Janco Partners in Denver.
Malone has tried at different times to launch a global cable empire, but without much luck, said Jack Myers, editor of the Jack Myers Report, a media industry newsletter.
"Every time he has tried to build cable in Europe, he has been kicked down by deals falling through or by regulatory intervention," Myers said.
But this time could be different.
"The higher growth stories are in the spinoff," said Ted Henderson, an equity analyst with Stifel Nicolaus & Co. in Denver. "It was something that was a long time in coming."
Liberty Media, once chided as a mutual fund masquerading as a public company because of its multiple investments, claims the spinoff will simplify its corporate structure, boost its stock value, and provide a new currency for international acquisitions.
"This creates more visibility within Liberty and uncomplicates our structure," said Liberty spokeswoman Julie Ballantine.
Liberty Media shareholders will receive one share in the new company, expected to start trading Tuesday on the Nasdaq under the symbols LBTYA and LBTYB, for every 20 they hold in the old one. The new shares are likely to be around $38, based on bulletin-board trading ahead of the spinoff, which occurs after the market closes today.
The old Liberty Media will keep valuable U.S.-based programming assets, such as the QVC home-shopping channel, Discovery Communications and movie provider Starz Encore, and the bulk of investments in Rupert Murdoch's News Corp. and Barry Diller's InterActiveCorp.
The new company, in contrast, has a concentration of cable television systems in Japan, Europe and Latin America, as well as some affiliated programming.
The spinoff's largest asset is its 46 percent holding of UnitedGlobalCom, a Denver-based public company with a market value of $5.75 billion and extensive cable holdings in Europe.
The other big holding is a 45 percent interest in Jupiter Communications, Japan's largest cable provider.
Harrigan, the Janco analyst, predicts that it's only a matter of time before UnitedGlobalCom and Liberty Media International are folded together, under Malone's direction.
"There is a decent likelihood that UnitedGlobalCom gets taken out at some point," he said. "The Street still penalizes the company's complexity."
Harrigan sees another reason for Malone's close involvement.
Liberty Media's key holdings are self-managed and self-contained, and its investments in outside companies aren't large enough to allow it a significant say.
"Malone has much greater ability to do things at Liberty Media International," Harrigan said. "There is more to be done in the way of consolidation."
In theory, the two Libertys will own no stock in each other and operate independently. In practice, the ties will be close and binding.
Liberty Media International will sublease office space from Liberty Media space and even holds a quarter share of Liberty's two corporate jets.
Liberty will also extend a credit line of up to $500 million to the spinoff through the end of the year.
Liberty Media International said Friday it had registered with regulators to raise up to $500 million through the sale of additional shares to existing shareholders.
Those funds will pay down the credit line and other debt owed its former parent.
The take-charge guy
Who: John Malone
Age: 63
Title: Chairman of Liberty Media Corp., a Douglas County holding company with interests in media communications and entertainment businesses
History: Ran cable company Tele-Communications Inc. from from 1973 to 1999, when it sold for $48 billion to AT&T
Boards: Bank of New York, CATO Institute, Discovery Communications, The Nature Conservancy, UnitedGlobalCom, IAC/InterActive Corp.
Net Worth: $1.8 billion in 2003, according to Forbes
Liberty Media International
Ticker: LBTYA/LBTYB
Exchange: Nasdaq
Shares outstanding: 146 million
Market value: $6 billion to $7 billion
Rank by market value in Colorado: No. 5
Exchange ratio: 1 share per 20 shares of Liberty Media
Chairman\chief executive\president: John Malone
Assets: $10.7 billion
Long-term debt: $3.9 billion
Employees at company and affiliates: 11,000
Revenues (Q1): $576.3 million
Net loss (Q1): $83.9 million
Countries reached: Japan, France, Netherlands, Austria, Norway, Sweden, Belgium, Germany, England, Ireland, Poland, Hungary, Romania, Czech and Slovak republics, Chile, Brazil, Peru, Argentina, Uruguay, Mexico, Puerto Rico
Source: Liberty Media International
Building blocks
Liberty Media International will have a value of $7.16 billion, says Matthew Harrigan of Janco Partners. Here is how it breaks down:
$3.2 billion: UnitedGlobalCom Inc. (Europe, Latin America)
$1.8 billion: Jupiter Communications (Japan)
$522 million: Jupiter Programming Co. (Japan)
$279 million: Telewest (England)
$229 million: Liberty Cablevision of Puerto Rico (Puerto Rico)
$171.7 million: Metropolis (Chile)
$93 million: Sky Latin America (Mexico/South America)
$216.3 million: Other holdings
$645 million: Financial assets*
*At the time of the spin-off, Liberty Media will provide LMI with $50 million in cash, 5 million ADR shares of News Corp., worth about $180 million, and 345,000 shares of ABC Family Worldwide, worth $412.6 million.
Source: Matthew Harrigan, Janco Partners |
