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Wall Street cred

Investors praise Malone at awards lunch

As his peers gathered Monday to celebrate John Malone, investors in Liberty Media echoed the praise for an exec and cable pioneer who’s brought extraordinary returns to shareholders in his hybrid company — part investment fund, part operator.

Liberty, now a tracking stock of AT&T, has made a spate of acquisitions recently, including Todd-AO, Four Media, Ascent Entertainment and a piece of Emmis Communications. It’s used stock for most deals, retaining an enormous war chest of some $4 billion. Part of that will likely go to share repurchases. And more purchases, big and small, are surely in the cards.

Whatever the game plan — Liberty keeps that rather close to the vest –Wall Street is happy to go along for the ride.

“They’ve consistently identified assets to invest in, in the media world, before other people,” said Mark Greenberg of the Invesco Leisure Fund. It did so early on in cable, picking up chunks of Encore Media, Discovery Communications, E! Entertainment, BET Holdings and USA Networks, among others.

Malone did most of his cable investing as chairman of TCI, Liberty’s former parent company, which was bought by AT&T earlier this year.

For years, TCI was one of the two biggest cable operators in the nation and Malone was known as a very tough negotiator. Accepting an award from the Center for Communications at a luncheon in New York Monday, Malone thanked AT&T topper C. Michael Armstrong “for turning me from a ruthless monopolist into a benevolent investor.”

That line drew some laughs. But Malone is still plenty powerful, said fund manager Alan Snyder of Snyder Capital. After all, he said, AT&T, now the largest cabler, has agreed to provide Liberty with a certain amount of channel capacity for future projects. “I think he’s still got that power. The big difference is now he’s got billions of dollars of cash, while all his career he’d been leveraged to the hilt,” Snyder said.

As for Liberty’s recent deal, he added, “They’re trying to control as much of everything that goes through the pipe as they possibly can.” That’s been the company’s modus operandi from the start. It’s what prompted Liberty to spin off Liberty Digital to house all its online investments and scout for more.

The Todd-AO and Four Media deals indicate that Liberty is looking to make its mark in production, post-production and technical services, too. Several years down the road, Wall Street won’t be surprised to see a host of other spinoffs — say, Liberty Sound Editing, Liberty Programming, etc., that would provide a currency to do deals and a means to group related acquisitions under one roof.

The precise logic of the Emmis stake isn’t as clear to some investors. Radio has been a hot sector for three years already, although there could still be another round of consolidation, and there’s lots to explore on the Internet side. But the $150 million investment is small potatoes. It’s sure been sweet for Emmis shareholders as others followed Liberty into the stock.

Snyder said Liberty doesn’t make many bad investments. “The stuff that doesn’t work loses $100 million, and the stuff that does makes $5 billion.”

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