QVC’s Parent, And John Malone, Go Back To The Past

In a deal that we have’t quite figured out yet, on Tuesday QVC’s parent, Liberty Interactive Corp., announced that it was purchasing an Alaska-based cable company, General Communications Inc.

http://ir.libertyinteractive.com/releasedetail.cfm?ReleaseID=1020047

The power behind the throne at Liberty is John Malone, a cable cowboy and financial whiz who made his name creating the cable giant Tele-Communications Inc. years ago.

Here is part of the announcement:

Liberty Interactive Corporation (“Liberty Interactive”) (Nasdaq: QVCA, QVCB, LVNTA, LVNTB) and General Communication, Inc. (“GCI”) (Nasdaq: GNCMA) today announced that they have entered into a definitive agreement (the “Agreement”) whereby Liberty Interactive will acquire GCI through a reorganization in which certain Liberty Ventures Group (“Liberty Ventures”) assets and liabilities will be contributed to GCI in exchange for a controlling interest in GCI.

Liberty Interactive will then effect a tax-free separation of its controlling interest in the combined company (to be named GCI Liberty, Inc. (“GCI Liberty”)) to the holders of Liberty Ventures common stock in full redemption of all outstanding shares of such stock.

“We are pleased to announce this transaction with GCI,” said Greg Maffei, Liberty Interactive President and CEO. “GCI is the largest communications provider in Alaska, generates solid cash flow with upside potential and is a strong fit with the largest businesses in Liberty Ventures. This transaction will ultimately create a standalone Liberty Ventures, reducing the tracking stock discount and enabling an asset-backed QVC Group.”

“This transaction with Liberty Interactive brings GCI back full circle, as GCI was part of TCI until 1986. We couldn’t think of a better owner, and look forward to being the largest operating asset within GCI Liberty,” said Ron Duncan, GCI President and CEO. “We will continue to run the company with our focus on providing the best value for Alaska customers, offering opportunities for our employees and investing wisely in the Alaska market.”

Liberty Interactive believes the creation of GCI Liberty will provide the following benefits:

Reduce Liberty Ventures tracking stock discount
Provide greater flexibility for GCI Liberty to pursue future strategic transactions
Produce strong free cash flow allowing for potential stock repurchases
Establish a strong currency that will be a more effective tool for management compensation and retention
Provide financial flexibility for future borrowings

Liberty Interactive believes an asset-backed QVC Group will provide the following benefits:

Establish leading pure play discovery based retail and eCommerce company
Liberty Interactive expected to be renamed QVC Group, Inc.
Make QVC Group eligible for possible inclusion in stock indices through elimination of tracking stock structure
Reduce the tracking stock discount
Increase near-term and annual liquidity through reattribution (discussed below) of approximately $329 million(1) of cash and approximately $130 million annual free cash flow from tax savings related to exchangeable bonds that will grow
Cash can be used for investments, stock repurchases and debt reduction
Establish a strong currency that will be a more effective tool for management compensation and retention and for potential future acquisitions
Maintain strong ability and liquidity to service all debt.

Even Reuters agreed that this is a complex transaction, which is Malone’s specialty.

http://www.reuters.com/article/us-general-communication-m-a-liberty-int-idUSKBN1761EW

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