Speaking at Tuesday’s Goldman Sachs investors conference, Liberty Media executive VP and chief operating Officer Gary Howard hinted at a possible “change of ownership structure,” at the market-leading shopping network when the next trigger date for the two companies’ put-call options on each other’s shares comes up in February 2003.
Howard said that Liberty’s had a “liquidity event” coming up in February regarding its 44% stake in QVC: “They could buy us, we could buy them, or the whole thing could go up for sale.” Liberty owns 44% of QVC, but is generally believed to have limited interest in every buying out Comcast.
Under a put-call agreement, Malone could force Comcast — already tight on cash as it prepares to absorb AT&T — to buy out its stake, while Comcast has a counter-balancing right to put its stake to Liberty. If neither wants to purchase, then they must agree on a joint sale.
Comcast CEO Brian Roberts was tight-lipped about any possible cable program asset disposals in the wake of its soon-to-close multibillion merger with AT&T Broadband, but the huge amount of debt the Philadelphia-based cable group is piling on to become the company’s biggest operator have given some analysts pause. In addition to QVC, Comcast owns valuable stakes in E! Entertainment Television, the Golf Channel and Outdoor Life Network. A company spokesman said the company intends to keep its programming assets after the AT&T merger.
Analysts generally agree that it makes more sense for Comcast to control QVC, since it has sufficient tax losses to shelter QVC’s income. Howard praised the shopping net’s impressive double-digit growth rates, but hinted that QVC’s approaching net profits would mean taxes “and we like to avoid tax situations.” But if Malone were to invoke his side of the put agreement, it could be tough for Comcast to summon the estimated $900 million necessary to buy out the balance.
Though pundits don’t see any immediate reason for Malone to pull the trigger, it wouldn’t be prudent to rule it out entirely, especially if Malone has designs on a major assetin the longer term that would require a big chunk of cash.
The relationship between Comcast and Malone has been rocky in the past. The Liberty chief reportedly was furious in 1997 when Microsoft’s Bill Gates and the Roberts family (working through banker Steve Rattner) tried to wrest control of some 32 million TCI voting shares when Malone himself was trying to secure control of the cable giant. In 1999, Malone and AT&T outbid Comcast for MediaOne.
Liberty also confirmed that it was negotiating with investment groups Blackstone and Apollo for 10 million home German cable franchises owned by Deutsche Telekom. Asked about its designs on Vivendi Universal Entertainment assets, Howard said that combining some assets like USA Network and Sci-Fi channel with Liberty holdings such as Starz-Encore presents “an interesting scenario,” but added that, in the end, “It’s up to (Vivendi Universal chief Jean-Rene) Fourtou.”