Liberty Media Drops Plan to Buy Rest of SiriusXM, Creates Two Tracking Stocks

John Malone Liberty Media
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John Malone’s Liberty Media said it has given up efforts to acquire the stake in satellite-radio company SiriusXM that it doesn’t already own, and instead is focused on raising capital for cable company Charter Communications to expand.

The company is creating two new tracking stocks: Liberty Media Group and Liberty Broadband Group. The latter will encompass Liberty’s 27% stake in Charter, plus its 1% interest in Time Warner Cable as well as it subsidiary TruePosition, a provider of location-based solutions for public safety and national security markets. The Liberty Media Group would have attributed to it all of the other businesses, assets and liabilities of the company, including Liberty’s subsidiary Sirius XM Holdings, the Atlanta Braves and Liberty’s 17% interest in Barnes & Noble.

Liberty expects to complete the creation of the new tracking stocks by the third quarter of 2014.

“We remain very excited about our investments in the cable sector and Charter Communications,” said Malone, who is Liberty’s chairman, in a statement. “We believe the creation of the Liberty Broadband tracking stock and the concurrent rights offering will provide us greater flexibility to, among other things, support Charter in its expansion efforts.”

Charter, in conjunction with Liberty Media, launched a hostile takeover for Time Warner Cable in January with an offer valued at about $37 billion (excluding debt). Comcast then swooped in with its higher offer last month.

For each share of Liberty’s common stock, current Liberty Media shareholders will receive one share in the new Liberty Media tracking stock and four shares of the Liberty Broadband tracking stock.

In addition, Liberty stockholders will receive a subscription right to acquire one additional share of Liberty Broadband tracking stock — at a 20% discount to a 20-day volume-weighted trading price — for every five shares of Liberty Broadband tracking stock they receive in the distribution. The cash raised from the subscription rights, which will expire 40 days after the distribution, will go to the Liberty Broadband Group.

Liberty owns 53% of SiriusXM. It announced a plan in January to buy the remaining shares of the company in a transaction worth more than $10 billion, which Malone said at the time would “enable us to focus our energies on the pursuit of new opportunities across the expanded portfolio of Liberty’s businesses and to optimize our capital structure.”

Liberty president and CEO Greg Maffei, in announcing the two tracking stocks, said the company’s offer for SiriusXM “is no longer applicable.” He added that Liberty remains “enthusiastic owners of 53% of SiriusXM” and said that depending on market conditions, “we look forward to further discussions with the SiriusXM Special Committee.”

Liberty expects that the Series A and Series B Liberty Broadband tracking stock will trade under the symbols LBRDA and LBRDB, respectively, and that the Series A and Series B Liberty Media tracking stock will trade under the symbols LMCA and LMCB, respectively (which are currently used by Liberty’s stocks). All of the issues will be on the Nasdaq.