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Liberty, DirecTV to merge

Media company nabs majority interest

Satcaster DirecTV is about to play a more prominent role in John Malone’s Liberty Media empire.

Liberty Media said Monday it will merge its DirecTV Group subsidiary with a clutch of assets from its Liberty Entertainment unit to form a separate publicly traded entity named DirecTV.

Chase Carey, prexy and CEO of DirecTV, will continue in his role, and the satcaster’s existing board of directors, chaired by Malone, is expected to remain in place.

The assets merging with DirecTV include Liberty’s 65% share in cabler GSN, three regional sports cablers and tech shingle Fun Technologies. The new DirecTV will absorb $2 billion in debt, which will be paid off in part by a $650 million loan from the satcaster.

Plans for the Liberty Entertainment spinoff have been in the works since last fall, but the initial deal called for Liberty Entertainment to serve as the parent of DirecTV, but now DirecTV will serve as the parent of the enlarged company.

Liberty Entertainment’s remaining assets, including the Starz group of cablers, will be spun off into another publicly traded entity dubbed Liberty Starz.

As always with Malone deals, understanding the rationale for the asset shuffling requires a master’s degree in finance. But execs have been know to be frustrated with the low price of shares Liberty Media and the Liberty Entertainment tracking stock, relative to the value of DirecTV and other holdings.

There was speculation Monday on CNBC that the maneuvering was a bid by DirecTV to streamline its ownership structure to facilitate a merger or acquisition with a non-Liberty-owned entity down the road.

Carey stressed that the transaction would benefit DirecTV by reducing the number of outstanding shares, help with its underlying capital structure and provide it with channels that are a good fit with its core biz.

“Our existing equity structure was less than ideal,” Carey said in a statement. “The transaction will improve our ability to pursue strategic initiatives that can enhance value for all DirecTV shareholders.”

The transaction, expected to be completed by year’s end, will leave Liberty Media will leave Malone and his family controlling 24% of DirecTV. As part of the spinoff agreement, Malone has agreed to “certain limitations” on his ability to buy or sell his shares.

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