DIRECTV Group and Liberty Media Corporation Announce Combination

[Scott Greczkowski]

DIRECTV Group and Liberty Media Corporation Announce Combination


EL SEGUNDO, Calif. & ENGLEWOOD, Colo., May 04, 2009 (BUSINESS WIRE) -- The DIRECTV Group, Inc. and Liberty Media Corporation today announced they have entered into definitive agreements for the combination of DIRECTV Group with Liberty Entertainment, Inc., a company to be split-off from Liberty Media.
"We are pleased to announce this transaction as it will rightly put the control of DIRECTV in the hands of DIRECTV shareholders," said Chase Carey, President and CEO of DIRECTV. "Our existing equity structure was less than ideal. The transaction will improve our ability to pursue strategic initiatives that can enhance value for all DIRECTV shareholders. Additionally, in Game Show Network, FUN Technologies and the three regional sports networks, we are acquiring valuable assets that fit in well with the future of the DIRECTV business. We look forward to having the benefit of John Malone's involvement, as a significant shareholder and as chairman of DIRECTV's board post-merger."

"This transaction clarifies DIRECTV's capital structure, reduces its shares outstanding, eliminates stock overhang and arbitrage issues, and provides DIRECTV with strategic content businesses," said Greg Maffei, President and CEO of Liberty. "And this transaction offers value to Liberty's shareholders by eliminating the discount in our tracking stock structure and allowing them to continue to participate directly in the strong performance of DIRECTV."
The steps in the transaction include Liberty Media proceeding with the previously announced split-off of Liberty Entertainment, Inc. (LEI), which will hold the majority of the assets and liabilities currently attributed to the Liberty Entertainment group tracking stock. LEI will now be comprised of: (i) approximately 54% of the common stock of DIRECTV, (ii) Liberty Sports Holdings, which owns three regional sports networks (RSNs), (iii) a 65% interest in Game Show Network (GSN) and FUN Technologies, (iv) approximately $30 million in cash in addition to cash generated by operations after March 31 and (v) $2 billion in debt. DIRECTV will provide to LEI up to $650 million in funding pursuant to a term loan facility in order to service the LEI debt.

In the split-off, each holder of Series A Liberty Entertainment group tracking stock will receive 0.9 of a share of LEI Series A common stock and will retain 0.1 of a share of Liberty Starz stock, representing the balance of the assets and liabilities of the Liberty Entertainment group, for each share of Series A Liberty Entertainment group tracking stock held at the time of the split-off, and each holder of Series B Liberty Entertainment group tracking stock will receive 0.9 of a share of LEI Series B common stock and will retain 0.1 of a share of Liberty Starz stock for each share of Series B Liberty Entertainment group tracking stock held at the time of the split-off.

LEI and DIRECTV Group (DTVG) will merge with subsidiaries of a newly formed subsidiary of DTVG that will be called DIRECTV. As a result of the mergers, DIRECTV will become the parent company of DTVG and LEI. DIRECTV will have two classes of stock, Class A which will be entitled to one vote per share and Class B which will be entitled to 15 votes per share. In the DTVG merger, DTVG shareholders will receive one share of DIRECTV Class A common stock for each share of DTVG common stock held. The holders of LEI Series A and Series B common stock (other than John Malone, his wife and associated trusts) will receive 1.1111 shares of DIRECTV Class A common stock for each share of LEI Series A or Series B common stock held (as adjusted pursuant to the merger agreement). John Malone, his wife and associated trusts will receive 1.1111 shares of DIRECTV Class B common stock for each share of LEI Series B common stock held (as adjusted pursuant to the merger agreement).
The businesses, assets and liabilities of the Liberty Entertainment group tracking stock not included in the split-off of Liberty Entertainment will continue to be attributed to the Liberty Entertainment group, which will be renamed "Liberty Starz". Liberty Starz will consist of Starz Entertainment, 37% of WildBlue, PicksPal, Fanball and approximately $650 million in cash and cash equivalents. The Series A Liberty Starz common stock and Series B Liberty Starz common stock are expected to be listed on NASDAQ under the symbols LSTZA and LSTZB, respectively.

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The DIRECTV Group, Inc. - DIRECTV Group and Liberty Media Corporation Announce Combination

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[sundude90]

This sounds like it will be a good thing for Directv in the long run. I just listened to the conference call about this, and all parties seems very optimistic about this.

I would like to note that this will take around 6 months to fully go into effect because of numerous approvals that need to happen first including the FCC.

[69Mustang]

On CNBC they briefly said something about the new DTV to be sold to AT&T??
Any insight on that?

[Geronimo]

On CNBC they briefly said something about the new DTV to be sold to AT&T??
Any insight on that?

AT&T has long been rumored to be interested in obtaining the programming assets of Liberty and DTV. If they are combined there are bound to be reports of heightened interst at AT&T.

[JosephB]

I'm surprised they kept Starz separate. Imagine the powerhouse that would result if DirecTV was directly part of Starz.

[Rey]

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ok so what does this mean exactly for directv aside from the share holders?