Shareholders of both Liberty Media and DirecTV approved transactions to split off Liberty Entertainment from Liberty Media and merge it with DirecTV. Rumors are already heating up about what lies ahead.
As with most deals involving John Malone, this one was complicated:
“In the transactions, Liberty executed a split-off that resulted in the redemption of 90% of the outstanding shares of both series of its Liberty Entertainment common stock in exchange for all of the outstanding shares of two series of common stock of LEI. The Merger Agreement provided for two mergers that resulted in DIRECTV Group and LEI becoming wholly-owned subsidiaries of DIRECTV. In the DIRECTV merger, DIRECTV Group common stockholders (other than direct or indirect subsidiaries of LEI) received one share of DIRECTV Class A common stock for each share of common stock of DIRECTV Group that they owned. In the LEI merger, holders of outstanding shares of LEI Series A common stock and LEI Series B common stock (other than LEI or DIRECTV) received a number of shares of DIRECTV Class A common stock equal to the LEI exchange ratio for each share of LEI common stock that they owned. The LEI exchange ratio was equal to 1.11130 shares of DIRECTV common stock for each share of LEI common stock.
Immediately prior to the mergers, the Malones, pursuant to the Malone Agreement, exchanged each of their shares of LEI Series B common stock for a number of shares of DIRECTV Class B common stock equal to the number of shares of LEI Series B common stock they owned multiplied by the LEI exchange ratio. The Malones are the only holders of DIRECTV Class B common stock and their votes are subject to limitations imposed by the Malone Agreement. DIRECTV Class B common stock has fifteen votes per share and certain limited consent rights and will not be publicly traded, and DIRECTV Class A common stock has one vote per share and is listed on the NASDAQ National Market System under the symbol “DTV” and will begin trading on Friday, November 20, 2009.
As a result of the merger transactions, there will be approximately 910 million shares of DIRECTV Class A common stock (NASDAQ:DTV – News) outstanding when trading begins and approximately 22 million shares of DIRECTV Class B common stock, all of which is held by the Malones and will not be listed. In addition, stock options and SARs relating to Liberty Entertainment common stock were converted into stock options and SARs relating to DIRECTV’s Class A common stock,” DirecTV said in an announcement.
In short, Malone will control about a quarter of the voting rights, although his Class B shares comprise a much smaller equity stake.
RBR-TVBR observation: Both Verizon and AT&T are believed to be eying DirecTV as a takeover target, which would immediately add a national satellite footprint to their fast-growing wired cable competitors. Last week’s selection of Pepsi executive Michael White, with no media experience, as the new CEO of DirecTV was seen by many observers as an indication that his primary job will be selling the company.