DirecTV and Liberty Media’s Liberty Entertainment plan to merge, giving John Malone even more control over the satellite TV giant, in which he already owns a large stake.
Malone, Liberty’s boss, will be chairman of the new DirecTV Group and DirecTV president and CEO Chase Carey will run the combined company under his current titles.
The deal will add Liberty Entertainment’s Game Show Network, FUN Technologies and three regional sports networks to DirecTV. Other Liberty Entertainment assets–Starz, PicksPal, Fanball and the company’s 37% stake in broadband service provider WildBlue–will not be a part of DirecTV and will instead be spun off as Liberty Starz, which will be publicly traded on Nasdaq. The spinoff is expected before the merger, which should be completed in Q4.
Because of Malone’s 54 per cent stake in DirecTV, a merger of some sort had been expected.
Malone’s ownership of DirecTV Group will consist of the following, according to The Hollywood Reporter:
Malone, his wife and associated trusts will hold shares entitling them to approximately 24% of DirecTV’s total voting power, while their economic stake amounts to only 3%. The Malones, who will mainly hold special Class B stock in the new entity, have entered into an agreement that, among other things, requires them to vote their shares in support of the transaction and agree to certain limitations on their rights to sell or acquire shares. DirecTV has the right of first refusal should the Malones decide to sell their stock.
The new parent company will be called DirecTV Group with two classes of stocks. Existing DirecTV shareholders will receive one share of DirecTV Class A stock for each share they already own. Holders of Liberty Entertainment shares will receive 1.1111 shares of DirecTV Class A for each share Liberty Entertainment.
John Malone will receive 1.1111 shares of DirecTV Class B stock for each share of Liberty Entertainment Series B stock.
In a conference call, Carey discussed other financial terms:
DirecTV is paying a low single digit premium in the deal and will take a charge of $300 million-$400 million for it. [Carey] said the premium was appropriate and promised the combination would start being “marginally accretive” next year. Carey also said DirecTV would have preferred a single class of stock, but said the dual class structure aligns the interests of Malone and other shareholders.
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