NEW YORK — Comcast is plumping up its programming portfolio by way of a tidy stock-and-asset swap with John Malone’s Liberty Media.
In a roughly $1 billion deal announced Wednesday, Comcast is swapping its 4% equity stake in Liberty, valued at around $1.03 billion, for $545 million in cash plus Liberty’s 10% stakes in E! Entertainment, Style and the Intl. Channel Networks.
The virtually tax-free agreement to untangle the two companies’ intertwined holdings is trademark Malone in that reduces the tax owed to Uncle Sam to the bare minimum. Comcast would have had to pay at least $350 million more in taxes if it simply sold the stock in the open market.
Liberty parked the cash and programming assets in a new subsidiary, Encore ICCP, which gets transferred to Comcast.
Transaction also resolves a legal spat pending between Comcast and Liberty regarding a TCI Music agreement that Comcast inherited when it bought AT&T Broadband in November 2002.
Liberty takes back 120.3 million shares of class A common stock it gave to the Philadelphia-based cable giant when it bought home-shopping net QVC last year (in another tax-free asset swap).
For its part, Comcast gets another big fistful of dollars with which to buy back its stock. Cable company recently told its restive stockholders that it will repurchase up to $2 billion of its shares in the next year to boost value after its abortive play for Disney.
The trade is consistent with Liberty’s promise to clean up its unwieldy portfolio of minority holdings. It essentially is ceding to Comcast assets to which investors had attached little to no value.
In fact, based on Tuesday’s closing price, Prudential estimates Liberty is exchanging strategic assets worth about $930 million for financial assets valued at $1.03 billion.
Comcast ups its stake in popular cable nets E! Entertainment and Style to 60% (Disney owns 40%) as well as the Intl. Channel Networks. Analysts at Prudential say that extra equity clout may prompt Comcast to jumpstart negotiations with Disney for the remaining minority stake.
Wall Street was generally upbeat on the arrangement, nudging Liberty’s shares up by just under 1% to close at $8.61. Comcast’s stock, however, fell 1.6% to $27.85.