Jeff, you better get IATV on your index. Good luck hoping for a pullback. Malone is talking about what he's going to do with his new pile of cash:
All, A must read
2/19/1999
Malone's garden grows
Aftermath of AT&T/TCI merger leaves Liberty with debt-free leverage
and $9 billion in cash
With the AT&T-TCI merger cleared for takeoff, John Malone is poised
to pilot a Liberty Media Corp. that's awash in cash and largely
unburdened by debt.
For a TCI-era Malone, a debt-free bankroll was a bad thing. Historically,
he's preferred to borrow, largely for the tax benefit.
Now, however, the rules have changed for a merger-liberated Malone
and Liberty.
"We'll be starting life with $9 billion of cash," says Malone. "The
challenge is how to deploy that $9 billion and take the leverage up in a
way that enhances the growth rate and quality of the [Liberty] portfolio.
We'll be opportunistic--take a sow-a-few-seeds, tend-the-garden
approach.
"On leverage, it's all a target of opportunity," he says. "If the stock is
trading at 60% of breakup value, I'd say leverage the shit out of it and
buy stock ... . A lot of it is financial engineering--hedge positions in which
you have big economics, invest in opportunities."
Liberty's market capitalization is roughly $33 billion, and immediately
post-merger it will have 2.5 billion newly issued shares of stock--about
$5.5 billion in cash and the ability to obtain up to $8 billion in debt. The
additional $3.5 billion in cash, subject to market fluctuations, will come
from the sale of Liberty's Sprint PCS stake, a condition imposed by the
Justice Department.
But don't look for Liberty to go on a big-bucks spending spree, says
Malone: "When equity markets are high, it's not a great time to buy
something big with cash.
"In the technology world, you involve yourself in what you think are
strong ideas. Some work out, some don't. The typical venture capital
investment is a couple million bucks. Only when you have what you
think is a home run do you start pouring capital in. Liberty is a great
environment for this. Because of our financial position, there's not much
we don't get to see."
Liberty will focus on maintaining or improving its 20%-25% growth rate,
pumping up existing Liberty investments that the Malone-Dob
Bennett-Gary Howard management team considers attractive, and
looking for the next At Home, Teleport, or USA Networks.
E-commerce, interactive advertising, new programming--those are among
opportunities Liberty will explore. E-commerce is particularly attractive,
says Malone, because it "cuts across the Web-TV boundary better than
other applications."
What's out? "The one thing I won't let these guys invest in is a major
studio," says Malone. "We tried making pictures once, and they were
awful. I don't mind having affiliate companies do that. But in terms of
Dob being Cecil B. DeMille, don't count on it." |
