And, cut: IDT sells movie unit
Liberty gets group in $460M deal
Wednesday, May 17, 2006
BY TOM JOHNSON
New Jersey Star-Ledger Staff
In a surprise move, IDT yesterday agreed to sell its entertainment business to Liberty Media in a cash, stock and debt transaction valued at nearly a half-billion dol lars.
The Newark company will receive $186 million in cash for IDT Entertainment and will acquire Liberty's equity interest in IDT and its telecom unit, while Liberty will assume the debt of IDT Entertainment. All told, the deal is valued at about $460 million, said Andrew Baker, an analyst at Cathay Financial.
"The price is significantly higher than what I had the entertainment unit valued at," said Baker, who es timated the business was worth about $280 million. "It's a good price, but they are selling off one of their growing businesses."
The company's second-largest division, behind its telecom business, IDT Entertainment makes animated feature films, develops live-action content for television and distributes independent videos and DVDs. It generated $187 million in revenue last year and earned $7.5 million in income. It has stu dios in Newark and around the United States and Canada.
Wall Street liked the deal, as shares of IDT soared more than 14 percent yesterday. "It's clearly a positive deal for IDT," said Clay Moran, an analyst for Stanford Financial Group in Houston.
The sale of the entertainment unit, however, takes IDT out of an area its executives had often touted as a growth engine. "They lose their growth story, because their telecom business continues to decline," Moran said.
By acquiring all of Liberty Me dia's equity in IDT and its telecom unit, it also removes John Malone, Liberty's chairman, from any financial involvement in the Newark company. Malone, a deal-making tycoon well regarded by investors, bought a stake in IDT back in 2000.
"John Malone has been a great mentor and friend," Howard Jonas, IDT's chairman, said in a statement. "I anticipate great things from our continuing relationship."
IDT didn't respond to several calls for comment.
In announcing the deal, IDT Chief Executive Jim Courter said in a statement the company built the entertainment unit into a strong, vertically integrated company in just three years. "We are capitaliz ing on the value we have created in this business in order to allow us to generate an attractive return for our shareholders," he said.
Besides the cash, IDT acquires Liberty's stakes in the company and its telecom unit, which are worth about $216 million, according to Baker. Liberty also assumes about $60 million in debt from the entertainment unit, Baker said.
In addition, the agreement entitles IDT to share in the profit of the entertainment business if it does well during the next five years, he said. The deal is expected to close within three months, subject to customary conditions and regulatory approval.
IDT Entertainment will become part of Liberty's Starz Entertain ment Group, a premium movie service provider with 16 movie channels, including its flagship brand Starz and Encore.
MOVING PARTS
Sold
IDT Entertainment -- Animation and entertainment distribution business studios in Newark, around the United States and Canada
Retained
IDT Telecom -- Offers low-cost telephone service to customers in the United States, Latin America, Europe and Asia
Prepaid cards -- Purchased cards allow customers to make phone calls
IDT Capital -- Raises money for new business initiatives ranging from trading software development to radio stations, including WMET-AM 1160 in the Washington, D.C., market
Net2Phone -- Internet phone service provider |
