SW - news relating to IATV -
Liberty Media Plans to Combine
Internet Assets Into TCI Music
By LESLIE CAULEY
Staff Reporter of THE WALL STREET JOURNAL
Liberty Media Corp. plans to transfer its interactive and Internet assets
into TCI Music Inc., a publicly traded company it controls, in a move
aimed at creating a currency that can be used for Internet and media
deals.
In tune with the current Internet frenzy among investors, Wall Street
heartily embraced the proposed deal, pushing up TCI Music's stock from
about $8 to more than $30 in heavy trading on the Nasdaq Stock Market,
before closing at $29.5625.
The combined operations will adopt the name Liberty Digital, the existing
name of Liberty Media's interactive unit. Liberty Digital will trade under
TCI Music's existing stock symbol, TUNE, on the Nasdaq.
Cable programming veteran Lee Masters, whose resume includes the E!
Entertainment cable network, will move from his post as head of Liberty
Digital to become chief executive officer of the reconfigured company.
Mr. Masters said the assets of the combined company would have a
value of around $1 billion -- $650 million of that from the interactive and
Internet assets that Liberty Digital would contribute.
Liberty is the media investment arm of John Malone, the former
chairman of cable giant Tele-Communications Inc., which was acquired
last year by AT&T Corp. The proposed plan would shift some of Liberty
Media's most attractive assets outside the corporate empire of AT&T,
which technically owns Liberty Media as part of its purchase of TCI.
Liberty Media executives insisted that wresting free of AT&T's grasp
wasn't a goal, but acknowledged that would be one effect of the new
structure. Liberty Media trades as a tracking stock of AT&T, and
operates with almost complete autonomy from AT&T.
Over time, Mr. Masters said Liberty Digital hopes "to be to new media
and the Internet what Liberty was for cable programming," a nod to
Liberty Media's pivotal role in helping nurture along, at various times,
such media hits as Discovery and At Home Corp., the high-speed data
service. He said Liberty Digital, armed with its new trading currency,
intends to go trolling for new opportunities in the Internet and interactive
sectors. "Publicly traded currency is a wonderful currency to do
transactions with," Mr. Masters noted.
TCI Music, New York, to date has garnered little attention within the
Liberty Media empire. The company's principal assets include DMX, a
satellite-delivered digital-music service; the Box, an interactive
music-video service; and SonicNet (www.sonicnet.com1), an Internet
network of music Web sites. Those assets have a combined value of
about $400 million, Liberty estimates.
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Under the proposed plan, Liberty Digital would fold its growing stable of
Internet and interactive assets into TCI Music. Those assets include
equity investments in such ventures as priceline.com, iVillage, Sportsline
USA and Drugstore.com. Liberty Digital also would contribute its rights
to provide interactive-video services to TCI's cable systems.
Those rights, which were part of the AT&T-TCI merger agreement,
essentially guarantee the holder a chunk of channel space on TCI's
upgraded cable-TV lines, and hence a guaranteed customer base of more
than 12 million for new digital services. Mr. Masters day called those
rights "beachfront property," and said Liberty Digital is well on its way to
coming up with a development plan. He said the company is working on,
among other things, plans for a 24-hour digital-TV channel that features
"very simple, one-click interactivity."
In exchange for contributing its Internet and interactive assets to TCI
Music, Liberty Media would get 128.7 million newly issued shares of
TCI Music's Series B common stock. Liberty Media said the transaction
would push up its interest in TCI Music to 94% from 86% of the shares
outstanding of TCI Music's Series A common stock and Series B
common stock. TCI Music also would assume about $50 million in debt
related to its new assets, and Liberty would lend TCI Music as much as
$50 million "pursuant to a convertible note on terms to be mutually
agreed."
Liberty Media said debt currently owed by TCI Music to Liberty also
would become convertible debt, on the same terms. |
